Fani Warraich MANAGEMENT SCIENCES - Ethical & Professional Standards & Responsibilities

A financial advisor discovers that a junior analyst in their team has inadvertently shared a client’s confidential information with a third party. According to the CFA Institute's Standards of Professional Conduct, what should the financial advisor do first?

A. Terminate the junior analyst’s employment immediately to prevent further breaches.. B. Inform the client about the breach and take steps to mitigate any potential damage.. C. Report the incident to their compliance department and follow the firm's protocols for handling such breaches.. D. Contact the third party and request them to delete or return the confidential information..

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Explanation

The advisor should follow internal procedures to address and resolve the breach, ensuring the firm can take appropriate action.

Fani Warraich MANAGEMENT SCIENCES - Ethical & Professional Standards & Responsibilities

Which of the following best describes a requirement for firms to comply with GIPS standards?

A. Firms must present all individual performance figures to clients, including those that are hypothetical or back-tested.. B. Firms must adhere to the specific performance calculation and presentation standards prescribed by GIPS.. C. Firms are required to verify their GIPS compliance through a third-party auditor every year.. D. Firms must ensure that all employees receive GIPS training annually..

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Explanation

GIPS requires firms to follow its specific guidelines on how performance should be calculated and presented to ensure consistency and comparability.

Fani Warraich MANAGEMENT SCIENCES - Ethical & Professional Standards & Responsibilities

A portfolio manager receives a gift from a client valued at $200 after achieving substantial returns for the client’s portfolio. According to the CFA Institute Standards, how should the portfolio manager handle this situation?

A. Accept the gift and thank the client, as the value is less than $500 and considered reasonable.. B. Accept the gift, but report it to their employer in accordance with the firm's policies on gifts and entertainment.. C. Politely decline the gift to avoid any appearance of a conflict of interest or preferential treatment.. D. Return the gift and inform the client that accepting gifts violates the CFA Institute's ethical standards..

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Explanation

While accepting reasonable gifts is generally permitted, it must be disclosed to the employer to ensure transparency and avoid conflicts of interest.

Fani Warraich MANAGEMENT SCIENCES - Ethical & Professional Standards & Responsibilities

An analyst at a financial firm receives a non-public tip about an upcoming merger from a friend who works at the target company. According to the CFA Institute Standards of Professional Conduct, how should the analyst proceed?

A. Buy shares in the target company before the merger is publicly announced to benefit from the insider information.. B. Share the information with clients, ensuring they have the opportunity to invest before the news becomes public.. C. Report the information to their supervisor and the firm's compliance department, and refrain from trading on it.. D. Disclose the information to a reputable financial news outlet to ensure a level playing field for all investors..

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Explanation

This follows the standard regarding material non-public information, which requires members to not act or cause others to act on such information.