Shane Dorian, CFA and software analyst and portfolio manager for a large pension fund management company is waiting for a taxi when he sees Rob Machado, CEO of Board Technology, a small software company walk by with Buzzy Kerbox, CFO of Rainbow Inc., a larger rival software company.Shane recognizes the two and observes them talking amiably and shake hands.Then, he overhears Buzzy say to Rob, "We look forward to being bought by your firm."Shane can hardly believe his ears and immediately gets on his cell phone and tells his broker to buy 100,000 shares of Board Technology.

1.Based on the information above, which best describes Shane's situation.

A.Shane is in direct violation of insider trading laws because the information is both material and non-public in nature and he cannot trade on the information himself

B.Shane should not trade on the information for himself, but he may trade in the shares of either company for his clients because what he has heard is hearsay only

C.Shane is clear to trade on the information for his own account but not his client's accounts because the information is hearsay only and was not given to him as a breach of fiduciary duties, nor was it stolen, nor is there any implied quid pro quo, nor is there any monetary exchange for the information received

D.Shane is not allowed to trade on the information or cause others to trade on the information due to the nature of the information

2. Under ERISA rules, a fiduciary MUST:

A.Act solely in the interest of plan beneficiaries, manage for the exclusive purpose of providing benefits to plan participants, diversify plan assets and vote proxies

B.Act solely in the interest of plan beneficiaries, manage for the exclusive purpose of providing benefits to plan participants, diversify plan assets, act as a prudent expert, never get kickbacks, and never use plan assets for their own account

C.Both "A" and "B" are correct

D.Neither "A" nor "B" are correct

Hints: https://www.dol.gov/general/topic/retirement/erisahttps://www.investopedia.com/terms/e/erisa.asp

3. Which following statements is FALSE?

A.Under ERISA, a fiduciary must have a written investment policy.

B.Under ERISA, a fiduciary can outsource management responsibilities for the management of the pension fund.

C.Under ERISA, a fiduciary must adhere to the basic principals of modern portfolio theory.

D.None of the above because they are all true.

Hints: https://www.dol.gov/general/topic/retirement/erisahttps://www.investopedia.com/terms/e/erisa.asp

4. Which of the following is NOT an element of a "firewall" used to contain material non-public information.

A.Control over interdepartmental communications.

B.Limit information dissemination of insider information to appropriate employees only.Also known as "key access persons".

C.Review of all employee trades against a restricted list.

D.None of the above because they are all key elements of a "firewall".

5. CFA Institute Codes of Professional Conducts specifically addresses all of the following EXCEPT:

A. competence.

B. integrity and dignity.

C. independent judgment.

D. All of above.

6. According to CFA Institute Codes of Professional Conducts, members must practice, and encourage others to practice, in a professional and ethical manner that will:

A. reflect credit on members and their profession.

B. add value for clients, prospects, employers, and employees.

C. maintain the excellent reputation of CFA Institute and its members.

D. encourage talented and ethical individuals to enter the investments profession.

7. George Moses, CFA, analyzes Technicorp for a brokerage company. Extensive study has led Moses to rate Technicorp as a "hold," largely because of increasing competition in the industry. At a recent AIMR Society meeting, Moses discussed Technicorp's prospects with two other analysts. Although the other analysts did not give a reason, both said that Technicorp was about to experience rapid earnings growth. Immediately following the meeting, Moses issued a "buy" recommendation for Technicorp. According to the AIMR Standards of Practice Handbook, did Moses violate the AIMR Standards of Professional Conduct?

A. No.

B. Yes, because he copied the opinions of others.

C. Yes, because he did not seek approval of the change from his supervisor.

D. Yes, because he did not have a reasonable and adequate basis for his recommendation.

8. Wilfred Clark, CFA, accumulated several items of nonpublic information through contacts with computer companies. Although none of the information is "material" individually, Clark concluded, by combining the nonpublic information, that one of the companies will have unexpectedly high earnings in the coming year. According to the AIMR Standards of Practice Handbook, Clark:

A. may not use the nonpublic information.

B. may use the nonpublic information to make investment recommendations and decisions at any time.

C. must make reasonable efforts to achieve immediate public dissemination of the nonpublic information.

D. may use the nonpublic information only after gaining approval from a supervisory analyst attesting to its nonmateriality.

9. Louis Stark, CFA, is employed in the merger and acquisitions department of an investment firm. His friend, Elizabeth Mackie, CFA, is a portfolio manager in the investment management department of the same firm. Stark is helping a client acquire Gamma Corporation. According to the AIMR Standards of Practice Handbook, which of the following is the most appropriate action to take involving communication between the two departments?

A. Stark may tell Mackie about the pending merger if Mackie promises not to release the information to the public.

B. The investment firm should build a Fire Wall between the merger and acquisitions department and the investment management department.

C. The investment firm must add Gamma Corporation to its list of stocks that cannot be added to portfolios managed by employees of the investment firm.

D. Stark may tell Mackie about the pending merger if Mackie promises in advance not to use this information to help make an investment decision about Gamma Corporation.

10. An important purpose of full-disclosure laws and regulations is to

A. allow company employees to use inside information for personal gain.

B. provide information to investors so they can make informed decisions.

C. require companies to disclose all information about their operations.

D. prevent a stock's par value from dropping below its market value.