Chapter 2: Code of Ethics

1. Which of following principles is included in the Code of Ethics:

A. Conflicts of interest
B. Duties to clients
C. Professionalism
D. Professional behavior
2. When it comes to ethical principles, discussion often reveals that many employees think: It is
fine to browse the Internet or use the work telephone for unlimited numbers of private personal
calls.
Which of the following principles is most likely being flouted in this case?
A. Independence
B. Objectivity
C. Integrity
D. Confidentiality
3. Matching THREATS TO CASE STUDIES
Threats:
1. Familiarity b
2. Self-interest c
3. Self-review a
4. Advocacy e
5. Intimidation d
Case studies
A. Financial service firms does both corporate finance services and IPO for the same client
B. Having financial consulting the client firm for many years, the senior financial consultant has
become close friends with the Directors
C. Financial analyst owns large number of shares in the client company
D. Directors threaten to change financial analysis service if they do not get a positive analysis
report with buying-recommendation.
E. Financial analyst write a financial analysis report to promote the client’s position or opinion in
article.
4. To maintain truthfulness, the asset management profession must independent with:
A. Investment division.
B. Employer.
C. Regulators.
5. You visit a client who is a dealer in sport cars. He sells one of his car to a customer for $16000
with the advertisement of brand-new car with no faults; however he later tells you that the car
has a faulty braking system.
What should you do and why?
A. Nothing
B. Tell the customer
C. Tell the client (the car dealer) you believe he acted unethiccally, but that you are bound by
confidentiality therefore cannot tell anyone
D. Report your client to the authorities
6. You are a financil analyst of a large multinational organization and have gain non-public
insider information about takeover but to acquire a rival firm. By coincidence, a family friend is
considering sell shares in this rival organisation and has asked you, as an expert in the industry,
for advice in this matter. What would you do in compliance with Code of Ethics and why?
A. Tell the family friend that it is a bad time to sell and disclose to your employer this
communication
B. Decline to discuss the issue
C. Tell the family friend and your other asset management clients about the take over deal at the
same time
If you tell a family friend only that it is bad time to sell due to the takeover deal, which principle
is less likely involved?
A. Objectivity
B. Professional competence
C. Integrity
7. To make a decision to decline or continue to provide financial analysis service to a client,
which of the following is the first step that financial analyst need to consider?
A. Applying the safeguard.
B. Identifying the potential violated code of ethics
C. Evaluating the significance of the threats raised in the case
D. Determining the threats raised in the case
8. Which of the following is true for the main purpose of applying safeguards in practices?
A. To ensure conducts compline with the law.
B. To ensure identify all potential threats arisen in a given case.
C. To eliminate the threats or reduce the threats to an acceptable level.
D. To certainly assure that the benefits of all relevant stakeholders will be considered.
9. According to code of ethics, to compline with principle of “Independence”, a financial analyst
need meet requirements of:
A. Independence of mind and state of mind
B. Independence of mind and Independence in context
C. Professional skepticism and Independence of appearance
D. Independence of mind and Independence of appearance
Chapter 3:
1. According to Standard I(A) Independence and Objectivities, which of the following statement
is true:
A. The financial analysts may accept bonuses which are estimated based on the number of new
investors investing in subject company as a result of financial analysts’ reports.
B. The financial analysts may accept modest gifts which do not materially influence to their
professional judgements and financial analysts disclose these gifts to their supervisors.
C. The financial analysts may not accept arranged travel to participate in property tours offered
by their clients, even the offered transportation is modest.
2. William is the research analyst responsible for preparing and creating market analysis reports.
William finds some figures of historical bond yield and inflation rate on the World Bank website
that strongly support to his conclusion in the report. William immediately includes these figures
into his reports without citing source. William:
A. Violated the Standards I(C) because he did not cite the source.
B. Violated the Standards I(C) because he did not verify the accuracy and reliability of the
information
C. Was in full compliance with the Standard I(C)
3. In financial analysis report, Brown included some “Plain-language” descriptions of various
concepts, such as the reasons to use standard deviation to measure risks, how to use coefficient
variability to make investment decisions without reference to the original authors. Brown:
A. Violated the Standard I(C) Misrepresentation because he described common knowledge that is
not necessary to be included in the report.
B. Violated the Standard I(C) Misrepresentation because he did not cite and make reference to
original authors.
C. Was in full compliance with the Standard I(C) Misrepresentation
4. Which of the following is considered as the non-violation of Standard II(B) Market
manipulation:
A. Financial analysts spread false rumors to induce trading by others.
B. Financial analysts make transactions that artificially affect prices or volume to make price
movement in a financial instrument.
C. The stock exchange engages in a liquidity-pumping strategy on a new financial instrument
and the strategy is disclosed clearly.
5. Steve, an investment analyst, works at a well-known asset management firm. In an effort to
pump up the price of his holdings in a food company, he logs on to several investor chat rooms
on the internet to start rumors that the company is going to acquire one of the largest organic
food manufactures in anticipation of receiving a large contract for a chain of big supermarket.
Steve:
A. Violated Standard II(A) - Material nonpublic information by disseminating the material
nonpublic information to the market participants.
B. Violated Standard II(B) – Market manipulation by disseminating the false information with
intent to mislead market participants.
C. Was in full compliance with the Standard II(B) – Market manipulation and Standard II(A) –
Material nonpublic information.
6. Rose has been worked for BCK, Inc., to manage its pension fund. Rose’s duty of loyalty,
prudence, and care is owed to:
A. The managers of BCK.
B. The participants and beneficiaries of BCK’s pension plan.
C. The shareholders of BCK.
7. Which of the following statements about Standard III(B) Duties to employers – Loyalty is
most accurate?
A. The financial analysts are not allowed to enter into an independent business while still
employed.
B. The financial analysts may engage in independent practice for compensation, however it is
compulsory to inform their employers detailly before starting independent practice.
C. The financial analysts may take records or files created by themselves to a new employer
without the written permission of the previous employer.