2019 CFA level 3 qbank reading 4 asset manager code of professional conduct answers

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Kendall Kratz is consulting for Westmoreland Financial Services. Kratz was brought in by William
J. Westmoreland IV, grandson of the company's founder, to address concerns about ethics.
Westmoreland Financial does not have a centralized ethics code, but rather a series of rules of
conduct, most of which were instituted more than 20 years ago. William Westmoreland is
worried that the rm's policies have not changed with the times, so he has hired Kratz to review
all of the rules and bring the rm into compliance with the Asset Manager Code of Professional
Conduct.
As soon as he arrives at Westmoreland Financial, Kratz receives a copy of all the rules of

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conduct for his review. Every client receives a copy of these rules. Kratz settles down in a vacant
o ce to read and writes down the following.

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IPO's are distributed to about 60 percent of client accounts in proportion to account size,
but the remaining 40 percent do not receive any allocation.

All investment policy statements are reviewed on an annual basis.

Portfolio managers may accept any gift valued up to $200 provided that they notify their

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supervisors in writing, but must receive written consent from the compliance o cer in
advance before accepting anything more expensive.

Most stock research is done in-house. About 30 percent of Westmoreland Financial
clients do not own bonds, but substantially all of client brokerage pays for bond

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research.

Westmoreland Financial employees must receive preauthorization before buying stocks

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in the company's portfolio model, and are not to buy stocks in advance of

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recommending them for addition to the portfolio model.
In a later discussion with William Westmoreland, he learns that all of the rm's trades are

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conducted through Babel Brokerage, a business owned by William Westmoreland's nephew.
Babel provides best pricing and execution.
After making some recommendations regarding rules changes, Kratz is given two les to
consider. William Westmoreland believes the rm has not acted correctly, and wants Kratz's
opinion.

The rst le relates to the matter of Justin Yeats, a wealthy and amboyant movie actor with
more than $15 million under management at Westmoreland Financial. Veronica Jung, who
manages the Yeats account, wrote this account of what happened:
"Yeats called me at 8 a.m. Eastern time, an hour before the market opened. He wanted me to
purchase stock in Flim am Films. He told me that the CEO of Flim am spoke at a large fund />
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raiser the night before and provided some enticing sales gures for the rm's latest movie.
"Yeats, who is a bit of a stock junkie, also told me to purchase shares of Blanton Resorts. He
said he recently stayed in a Blanton Resort and found it o ered amenities not found elsewhere.
He then did some research, talking to the resort manager to assess his quali cations and
entrepreurial business approach, and reviewing the company's mission statement and
nancials. After all that, he concluded that Blanton was hiring the right people to grow the
business.
"After Yeats hung up, I looked up Flim am and discovered that the shares looked cheap. I then
checked news reports, but found only one story about the fund-raiser on the society page. The

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CEO's comments were not discussed. I also did some research on Blanton and learned that the
stock's volume was low, and only one analyst covered it. The stock appeared very cheap relative

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to earnings and book value. I immediately recommended Blanton for addition to the portfolio
model and submitted a purchase order for Blanton for all of my accounts before the market
opened, knowing it would not be executed until after the stock was approved by the investment

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director in the afternoon.

"I bought shares of Flim am for Yeats, and then picked up a few shares for myself, but I did not
buy Blanton for Yeats until the larger order was submitted, because I did not want to give Yeats
preferential treatment.

"Later that day, Agent Cornelius Fillmore of the Internal Revenue Service (IRS) called to request

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Yeats' trading records for a tax audit. In accordance with company policy, I refused, citing

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privacy concerns. Fillmore did not take the news well and said the agency's attorneys would be

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in touch. After the legal threat, I reconsidered and sent him the les."
The second le contains Westmoreland's disclosure policy:

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All returns disclosure will be presented net of fees.
All returns will be calculated on a quarterly basis, with monthly results available upon
request.
Any legal action taken against the analyst who manages the client account will be
disclosed.
All clients will receive a summary of our investment strategy and information about the
risks of the investments in their portfolios.
Reports will contain information about our use of soft dollars, referral fees, sales
incentives, brokerage arrangements, and a breakdown of our employees' holdings of
stocks' in the client's portfolio.

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After reading the disclosure policy, Kratz recommends that the company add four items to the
disclosure policy:
1. Allocation procedures.
2. Quali cations of account managers.
3. Asset-valuation methods.
4. Proxy-voting policies.

Question #1 of 24

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Which of Kratz's four suggested additions to the disclosure policy goes beyond the
recommendations set down by the Code?

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A) Recommendation 3.
B) Recommendation 2.
C) Recommendation 1.

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Explanation

The suggested disclosures include allocation procedures, valuations methods, and proxy
policies, but not quali cations of employees.

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SchweserNotes - Book 1

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(Study Session 2, Module 4.1, LOS 4.c)

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Question #2 of 24

With regard to the Flim am stock, the Code was:

A) broken when Jung purchased Flim am shares for herself, but not when she
purchased the shares for Yeats or when Yeats tipped her o about Flim am.
B) broken when Jung purchased Flim am for herself, and when she purchased
Flim am for Yeats, but not when Yeats tipped her o about Flim am.
C) not broken.
Explanation

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A speech at a fund-raiser is most likely a public event. When a reporter is there, the issue of
disclosure is moot, regardless of whether the reporter thought to write about the business
news. Yeats' tip is legitimate, and barring any rules about preauthorization, of which we have
no knowledge, Jung's purchase of Flim am shares for Yeats, then afterward for herself,
seems ethically sound.

(Study Session 2, Module 4.1, LOS 4.c)
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Question #3 of 24

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With regard to Babel Brokerage, Westmoreland Financial:

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SchweserNotes - Book 1

A) can comply with the Code only if it receives permission from clients.
B) can comply with the Code only if it switches a di erent brokerage.

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C) is in compliance with the Code.
Explanation

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While the use of Babel Brokerage may not look good, the holy grail of brokerage is best
pricing and execution. If clients are receiving the best service possible, the fact that William

Westmoreland's nephew owns the company does not put Westmoreland Financial in violation
of the Code. However, the rm would be wise to either switch brokerages or disclose the
relationship to clients and receive permission.
(Study Session 2, Module 4.1, LOS 4.c)

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SchweserNotes - Book 1

Question #4 of 24
How many items on Westmoreland's disclosure policy are insu cient to satisfy the Code?

A) 1 item.
B) 2 items.
C) 3 items.
Explanation
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Standard 4.A.14 says that rms must disclose all signi cant events that would help a

prospective client interpret the compliant presentation thus legal disclosure should include
information about action taken against the rm not just the investment advisor. Firms are
required to present either gross or net of fees as long as it is properly labeled so this is not a
violation of the GIPS. It is a recommendatin that returns should be presented gross of fees.
The other three statements satisfy the Code.
(Study Session 2, Module 4.1, LOS 4.c)
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SchweserNotes - Book 1

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Question #5 of 24
With regard to the Yeats account, Jung broke the Code:

A) only when she sent the trading records to the IRS.

B) when she failed to purchase Blanton shares for Yeats in the morning, but not when

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she recommended Blanton shares for purchase.

C) when she recommended Blanton shares for purchase, and when she failed to
purchase Blanton shares for Yeats in the morning.

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Explanation

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Jung violated the investment-process rules when she recommended Blanton stock for
purchase based on nothing more than a recommendation from a client and a few minutes of
analysis. She received a phone call an hour before the market opened, yet managed to talk to
her client and research two stocks before the hour was up. She did not meet the standard,
"Thoroughly investigate and research di erent investment options to have a reasonable basis
for a recommendation." As for Yeats' shares, while she did not have enough information to
recommend Blanton, she did have Yeats' instructions to purchase the stock for himself. There
appear to be no insider-trading issues, as the only nonpublic information he cited was an
informal conversation with the manager, which is not likely to be material. So Jung should
have purchased the shares for Yeats immediately, but not recommended them for anyone
else until she had researched the company thoroughly. Based on her reasoning for not
buying Flim am, Jung was apparently allowed to purchase speci c stocks at the request of
investors without submitting them for approval by the investment director, so no matter
what she thought about Blanton, there was no reason to wait on buying shares for Yeats.
Regarding the IRS, con dentiality rules do not necessarily apply to o cial legal investigations.
(Study Session 2, Module 4.1, LOS 4.c)
Related Material
SchweserNotes - Book 1

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Question #6 of 24
Which of the rules Kratz wrote down is most likely in violation of the Code?

A) Portfolio managers may accept any gift valued up to $200 provided that they notify
their supervisors in writing, but must receive written consent from the compliance
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B) IPO’s are distributed to about 60 percent of client accounts in proportion to account
size, but the remaining 40 percent do not receive any allocation.
C) Most stock research is done in-house. About 30 percent of Westmoreland Financial
clients do not own bonds, but substantially all of client brokerage pays for bond
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Explanation

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The Code prohibits the acceptance of gifts other than of a modest value. There is no dollar
amount stipulated in the standards although most likely $200 could be considered excessive.
The other requirements in the gift policy appear to conform. The IPO allocation looks bad
from the start, but the Code says investments must be fairly distributed among the accounts
for which they are suitable. IPO's are not for everyone, and it is certainly plausible that 40
percent of client accounts are too conservative for such securities. An annual review of
investment policy statements is su cient. Regarding soft dollars, the Code and Standards
acknowledges that not every client will bene t from the all research. Such mismatches are
unavoidable from a practical standpoint, and as long as brokerage is allocated toward
research alone, the rm should be covered.

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SchweserNotes - Book 1

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(Study Session 2, Module 4.1, LOS 4.c)

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Question #7 of 24

Which of the following is part of the general principles of conduct related to the Asset Manager
Code of Professional Conduct?

A) Disclosing con icts of interest.
B) Communicating with clients in an accurate and timely manner.
C) Seeking best execution.
Explanation

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The general principles of conduct related to the Asset Manager Code of Professional Conduct
are:
Act in a professional and ethical manner at all times;
Act for the bene t of the clients;
Act with independence and objectivity;
Act with skill, competence, and diligence;
Communicate with clients in a timely and accurate manner; and
Uphold the applicable rules governing capital markets.
The other answer choices deal with speci c sections of the Asset Manager Code but are not
considered part of the general principles of conduct.

(Study Session 2, Module 4.1, LOS 4.b)

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Related Material

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SchweserNotes - Book 1

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Question #8 of 24

Which of the following is NOT part of the ethical responsibilities related to the Asset Manager
Code of Professional Conduct?

A) Act in an objective manner.

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B) Do not engage in market manipulation of security prices.

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Explanation

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C) Communicate with clients in an accurate manner.

The ethical responsibilities related to the Code are:

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Always act ethically and professionally;
Act in the best interest of the client;
Act in an objective and independent manner;
Perform actions using skill, competence, and diligence;
communicate accurately with clients on a regular basis; and
comply with all legal and regulatory requirements.

Not engaging in market manipulation of security prices is part of the Investment Process
and Actions section of the Code and is not considered one of the ethical responsibilities.
(Study Session 2, Module 4.1, LOS 4.b)
Related Material
SchweserNotes - Book 1

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Question #9 of 24
Which of the following is NOT part of the ethical responsibilities related to the Asset Manager
Code of Professional Conduct?

A) Maintain the con dentiality of client information.
B) Always act in a professional manner.
C) Maintain your independence.
Explanation

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Always act ethically and professionally;
Act in the best interest of the client;
Act in an objective and independent manner;
Perform actions using skill, competence, and diligence;
communicate accurately with clients on a regular basis; and
comply with all legal and regulatory requirements.

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The ethical responsibilities related to the Code are:

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Maintaining the con dentiality of client information is part of the section of the Code dealing
with Loyalty and is not considered one of the ethical responsibilities.
(Study Session 2, Module 4.1, LOS 4.b)

Related Material

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SchweserNotes - Book 1

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Question #10 of 24

Which of the following is NOT part of the ethical responsibilities related to the Asset Manager

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Code of Professional Conduct?

A) Communicating with clients on a regular basis.
B) Trading regarding insider information, priority of transactions, soft dollars, and best
execution.
C) Acting in an independent manner.
Explanation

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The ethical responsibilities related to the Code are:
Always act ethically and professionally;
Act in the best interest of the client;
Act in an objective and independent manner;
Perform actions using skill, competence, and diligence;
communicate accurately with clients on a regular basis; and
comply with all legal and regulatory requirements.
Trading is not speci cally mentioned in the ethical responsibilities section of the Asset
Manager Code and is instead one of the six components of the Asset Manager Code
speci cally regarding trading which deals with insider information, fair dealing, soft dollars,
best execution, and the allocation of shares.
(Study Session 2, Module 4.1, LOS 4.b)

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Related Material

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SchweserNotes - Book 1

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Question #11 of 24

Which of the following least likely represents a purpose of the Asset Manager Code (AMC)?

A) Foster a culture of ethical and professional behavior throughout the rm.
B) Provide guidance for asset managers to provide services in a fair, professional

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manner, with full disclosure.

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Explanation

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C) Provide a check list for how to implement the AMC.

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The purpose of the Asset Manager Code is to foster a culture of ethical and professional
behavior throughout the rm that protects the interests of investors, protect and enhance
the reputation of the rm, and provide a useful framework for asset management rms to
provide services in a fair and professional manner with full disclosure.
(Study Session 2, Module 4.1, LOS 4.a)
Related Material
SchweserNotes - Book 1

Question #12 of 24

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Establishing information barriers between departments would fall under which section of the
Code?

A) Investment Process and Actions.
B) Compliance and Support.
C) Trading.
Explanation
Establishing information barriers falls under the Trading section of the Code and is meant to
restrict the ow of material nonpublic information so as to limit the potential misuse of this
information for insider trading.

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(Study Session 2, Module 4.1, LOS 4.d)
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SchweserNotes - Book 1

Georgette Litman, CFA, is an employee of Cooper and Grey Financial Consultants. She has had

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the responsibility for several client portfolios over several years. Litman was recently promoted
to a senior management position with the idea of establishing guidelines to help ensure
compliance with the Chartered Financial Analyst Institute Code and Standards and also the CFAI
Asset Manager Code of Professional Conduct in the rm's portfolio management business. To

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help in this task of compliance, Cooper and Grey Financial Consultants has hired Jack Book to
help institute a set of procedures that will help Cooper and Grey Financial Consultants achieve

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their goal. Book has a legal background and is a new employee at Cooper and Grey Financial

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Consultants. Litman hopes that Book can help by providing a new and outside perspective to
the process. Although Book is not a member of CFAI and has no immediate plans for joining
CFAI and taking the Level I exam, Book brings a wealth of knowledge and experience.

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Understandably, Book must take some time to understand many details, e.g., the reasons for a

separate conduct code for asset managers that is in addition to the CFAI Code of Professional
Conduct.
Litman wants to know what the clients of Cooper and Grey Financial Consultants are thinking
and get their perspective on how the rm is doing. She knows that many of the employees of
Cooper and Grey Financial Consultants have close relationships with the clients and that gifts
have been exchanged on occasion. She asks Book to look into this activity. She tells Book that it
is acceptable for "token" gifts of any kind (except illegal substances) to be exchanged as long as
the employees inform her of the gift. She sits down with Book to compose a list of all the recent
gifts that Cooper and Grey Financial Consultants employees have told her they have received.
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She says that it is a good step to nally get them written down. After they compose this list,
Book is to nd out if there have been gifts that Litman was not informed as being given or
received.
Litman is also concerned that money-laundering may be occurring through the accounts at
Cooper and Grey Financial Consultants. Book has a background in detecting money-laundering
activities, and this was one of the reasons Litman suggested that Cooper and Grey Financial
Consultants hire Book. Litman asks Book to create an anti-money-laundering policy to detect
and help prevent Cooper and Grey from being used for that purpose and other illegal activities.
Litman cautions Book that the CFAI Asset Manager Code of Professional Conduct prevents
Cooper and Grey Financial Consultants from providing client information to legal authorities, so

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Book will have to be careful in the design of the policies. Litman tells Book that, if all goes well
in this area, she will see to it that Book becomes the compliance o ce of Cooper and Grey. In

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this position, Litman says that Book will report directly to her, and she will then use this
information to report directly to the CEO and board of directors.

Litman asks Book to help her draft procedures for monitoring performance and evaluating

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managers. She and Book compile a list of procedures that they plan to employ. Litman
recommends abiding by the Global Investment Performance Standards, or GIPS, and using fairmarket values when determining portfolio asset values. Book insists that Cooper and Grey
Financial Consultants should use a third party for valuing asset accounts.

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In addition to suggesting that an independent third party evaluate the performance of
managers, Book recommends that the information disseminated to clients be reviewed by an

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independent third party for accuracy and completeness. Furthermore, in addition to

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maintaining adequate records, Book insists that Cooper and Grey Financial Consultants develop
a plan for dealing with a natural disaster or some other event that could potentially destroy the

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records.

Question #13 of 24
With respect to establishing compliance with the CFAI Asset Manager Code of Professional
Conduct, the fact that Book is not a member of CFAI is:

A) important and must be immediately remedied by his enrolling for the Level I exam.
B) not directly important.
C) important and must be immediately remedied by his joining CFAI, but he does not
have to enroll for the Level I exam.
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Explanation
It is not required that a CFAI member establish compliance.
(Study Session 2, Module 4.1, LOS 4.d)
Related Material
SchweserNotes - Book 1

Question #14 of 24

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Litman's past and future policy concerning the monitoring and control of the exchange of gifts

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has:

A) only one problem: she apparently has not prohibited cash gifts.

B) at least two problems: she apparently was not informed in writing and she has not
prohibited cash gifts.

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C) only one problem: she apparently was not informed in writing.
Explanation

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Recommend practices and procedures designed to prevent violations of the Asset Manager
Code addresses loyalty to clients. Loyalty to clients deal with always putting the client's
interests before your own, maintaining the con dentiality of client information, and not
engaging in any business relationship or accepting gifts from others that could a ect your
judgment and objectivity. The code requires a determination of what constitutes a token gift
and allowing only token gifts from outside business. This is to limit the in uence of these
individuals over the asset manager. Cash should never be accepted, employees should
always notify their supervisor in writing when they accept any gifts. Litman made no
reference to prohibiting cash, and the conversation implies that Litman had not been getting
reports of gifts in writing.
(Study Session 2, Module 4.1, LOS 4.d)
Related Material
SchweserNotes - Book 1

Question #15 of 24
Litman's instructions to Book concerning creating an anti-money-laundering policy to detect
and help prevent Cooper and Grey from being used for that purpose and other illegal activities
is:
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A) not entirely correct in that Cooper and Grey may give necessary information to
legal authorities in the event of an investigation.

B) not appropriate, nor is the issue a part of the CFAI Asset Manager Code of
Professional Conduct.
C) appropriate and correct.
Explanation

(Study Session 2, Module 4.1, LOS 4.d)

SchweserNotes - Book 1

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Question #16 of 24

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Recommend practices and procedures designed to prevent violations of the Asset Manager
Code addresses loyalty to clients. Loyalty to clients deal with always putting the client's
interests before your own, maintaining the con dentiality of client information, and not
engaging in any business relationship or accepting gifts from others that could a ect your
judgment and objectivity. Appropriate procedures include creating an anti-money-laundering
policy to detect and help prevent rms from being used for money laundering or other illegal

activities and creating a procedure that delineates how con dential client information should
be collected, utilized, and stored. The con dential information policy does not preclude
disseminating necessary information to legal authorities in the event of an investigation.

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Litman's plan for making Book the compliance o cer at Cooper and Grey is:

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A) not appropriate because Book is new to the rm.
B) not appropriate because in that position, Book should be the one reporting to the

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CEO and the board of directors.
C) not appropriate because Book is not a member of CFAI.
Explanation
Recommend practices and procedures designed to prevent violations of the Asset Manager
Code addresses compliance and support. Under compliance and support, the procedures
specify that a compliance o cer should be designated who reports directly to the CEO or
board of directors and who is responsible for making sure compliance procedures are in
place and followed. There are not strict and speci c quali cations such being a member of
CFAI (or not), nor how long the o cer has been with the rm.
(Study Session 2, Module 4.1, LOS 4.d)
Related Material
SchweserNotes - Book 1
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Question #17 of 24
In drafting procedures for monitoring performance and evaluating managers, the:

A) suggestion by Litman is generally accepted but that of Book is a violation of the
CFAI Asset Manager Code of Professional Conduct.
B) suggestions by both Litman and Book are generally accepted and recommended to
comply with the CFAI Asset Manager Code of Professional Conduct.
C) suggestions by both Litman and Book are not generally accepted nor

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recommended by the CFAI Asset Manager Code of Professional Conduct.

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Explanation

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Recommend practices and procedures designed to prevent violations of the Asset Manager
Code address performance and valuation. Performance and valuation deal with reporting

investment results in an accurate manner without misrepresentation and using fair-market
values when determining portfolio asset values. A good guideline to follow would be the
Global Investment Performance Standards (GIPS®), which incorporates a high level of quality
in reporting requirements. Because manager compensation is sometimes based on
performance results, managers may be tempted to manipulate performance results in an
attempt to increase their compensation. To avoid this con ict of interest, procedures for
valuing asset accounts should include transferring the responsibility of valuing asset
accounts to an independent third party.

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Related Material

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(Study Session 2, Module 4.1, LOS 4.d)

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SchweserNotes - Book 1

Question #18 of 24
In response to Book's suggestions concerning the hiring of a third party to review information
disseminated to clients and for the plan for dealing with a natural disaster, according to the
CFAI Asset Manager Code of Professional Conduct, Litman should:

A) adopt the plan for dealing with a natural disaster only.

B) adopt them both.
C) ignore them both.
Explanation
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Recommend practices and procedures designed to prevent violations of the Asset Manager
Code addresses compliance and support. Compliance and support deal with: ensuring
compliance with the Code and legal and regulatory requirements and appointing a
compliance o cer, ensuring that portfolio information disseminated to clients is accurate
and complete and reviewed by an independent third party, appropriately maintaining
records, employing quali ed sta along with adequate resources, and instituting a
contingency plan in the event of a natural disaster.
(Study Session 2, Module 4.1, LOS 4.d)
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SchweserNotes - Book 1

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Question #19 of 24

Stately Research is a rm specializing in providing investment research relating to individual
stocks. They have not implemented the Asset Manager Code of Professional Conduct and have
recently been cited by regulatory authorities for de ciencies in their research. Speci cally, they

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have been cited for unclear language regarding price target valuation methods and their
associated risks, the percentage of securities that were rated a "buy," "hold," or "sell," and
failure to adequately disclose "analyst industry view" ratings which ranked their analyst's
recommendations against a benchmark return such as the S&P 500. Which of the following is

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least likely to be responsible for causing the security violations?

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A) Lack of funding or adequate sta ng to conduct appropriate research.

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B) The non-management sta acting in an unethical manner.
C) Inadequate technological resources to adequately research investments.

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Explanation

Stately's lack of compliance with security laws can most likely be traced back to a lack of
upper level management supporting a high level of ethical behavior. Ethical leadership starts
from the support of upper management which leads to adequate funding and sta ng to
provide the right resources in hiring enough quali ed sta and employing the technology to
adequately research and report their stock ndings.
(Study Session 2, Module 4.1, LOS 4.c)
Related Material
SchweserNotes - Book 1

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Question #20 of 24
Which of the following procedures relates speci cally to maintaining the con dentiality of
information under the Loyalty part of the Code?

A) Maintaining records for an appropriate amount of time.
B) Using reasonable care and prudent judgment when managing client accounts.
C) Creating and implementing an anti-money laundering policy.
Explanation

(Study Session 2, Module 4.1, LOS 4.d)
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Question #21 of 24

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SchweserNotes - Book 1

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Where appropriate, rms should implement an anti-money laundering policy which falls
under the Loyalty to Clients section speci cally related to preserving the con dentiality of
client information. Developing a business continuity plan and maintaining records falls under
the Compliance and Support section of the Code. Using reasonable care and prudence falls
under the section of the Code dealing with Investment Process and Actions.

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Which of the following is part of the ethical responsibilities related to the Asset Manager Code?

A) Appointing a compliance o cer.

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B) Employing quali ed sta .

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C) Communicating with clients on a regular basis.
Explanation

The ethical responsibilities related to the Asset Manager Code are:
Always act ethically and professionally;
Act in the best interest of the client;
Act in an objective and independent manner;
Perform actions using skill, competence, and diligence;
communicate accurately with clients on a regular basis; and
comply with all legal and regulatory requirements.
The other answer choices listed relate to the speci c section of the Code dealing with
Compliance and Support.
(Study Session 2, Module 4.1, LOS 4.b)
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Related Material
SchweserNotes - Book 1

Question #22 of 24
Which of the following procedures is NOT part of the Performance and Valuation section of the

Code?

B) Performing stress testing on complex derivative products.

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C) Having an independent third party value client accounts.

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A) Implementing the Global Investment Performance Standards (GIPS®).

Explanation

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The Performance and Valuation section of the Code deals with reporting the client's and
manager's results in an accurate manner without misrepresentation. Stress testing falls
under the section of the Code dealing with Investment Process and Actions.
(Study Session 2, Module 4.1, LOS 4.d)
Related Material

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SchweserNotes - Book 1

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Question #23 of 24

Which of the following statements is least accurate? Adopting the Asset Manager Code of

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bene ts the rm by:

A) developing trust and con dence between the client and the rm.
B) helping investors identify rms that adhere to sound ethical practices.
C) bringing it into compliance with the Code of Ethics and Standards of Professional
Conduct.
Explanation
The Asset Manager Code is voluntary thus a rm is not obligated to adopt the code to be in
compliance with the Code of Ethics and Standards of Professional Conduct. This is in contrast
to individual CFA Institute members and candidates within the rm who must adhere to the
Code of Ethics and Standards of Professional Conduct.
(Study Session 2, Module 4.1, LOS 4.a)
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Learning Management System

Related Material
SchweserNotes - Book 1

Question #24 of 24
One of the purposes of a rm adopting the Asset Manager Code is to:

A) demonstrate a commitment to protect the interests of investors.
B) earn a higher rate of return on its clients’ investments.

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tre

Explanation

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C) increase the rm’s overall pro tability.

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c

The purpose of the Asset Manager Code is to foster a culture of ethical and professional
behavior throughout the rm that protects the interests of investors, protect and enhance
the reputation of the rm, and provide a useful framework for asset management rms to
provide services in a fair and professional manner with full disclosure. Gaining the con dence
of clients is a purpose of the AMC and would be part of earning higher pro ts and higher
return, but the correct answer is the most direct answer o ered.
(Study Session 2, Module 4.1, LOS 4.a)
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SchweserNotes - Book 1

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