Section 1.
Ethics
[CMT Level III_Ethics_Q1]
Keeley, a market technician with a brokerage firm, decides to change her recommendation for the common stock of Red
investment advice to all the
after the mailing, a client calls with a buy order for 500 shares of Red Company.
In this circumstance, Keeley should: (2 points)
A. Accept the order.
B. Advise the customer of the change in recommendation before accepting the order.
C
Choice B is correct. From the CFA Code of Ethics and Standards of Professional Conduct,
act with reasonable care and exercise prudent judgment. Members and Candidates must act for the benefit of their clients and
place he
recommendation, which is why B is the correct answer.
[CMT Level III_Ethics_Q2]
mergers and acquisitions department has represented the Britland Company in all of its acquisitions for the past 20 years. Two
of al
analysis research report, for public release, on the long-
What is the best course of action for Bliss to follow? (2 points)
A. Bliss may write the report but must refrain from expressing any opinions because of the special relationships between the
two companies.
B. Bliss should not write the report because the two Williams &
C. Bliss may write the report, but must disclose the special relationships with the company in the report.
Choice C is correct. From the CFA Code of Ethics and Standards of Professional Conduct,
reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients,
prospective clients, and employer. Members and Candidates must ensure that such disclosures are prominent, are delivered in
CMT( ) Level III Exam 1 / 16
Section 1. Ethics
[CMT Level III_Ethics_Q3]
Pendorf heads the research department of a large brokerage firm. The firm has many analysts, some of whom are CFA/CMT
charterholders and therefore subject to the CFA Code of Ethics and Standards for Professional Conduct. If Pendorf delegates
some supervisory duties, which statement best describes his responsibilities under the code and standards? (2 points)
b. Pendorf no longer has supervisory responsibility for those duties delegated to his subordinates.
c. Pendorf retains supervisory responsibility for all subordinates despite his delegation of some duties.
Choice c is correct. From the CFA Code of Ethics and Standards of Professional Conduct,
[CMT Level III_Ethics_Q4]
An investment management firm has been hired by ABC Corporation to work on an additional public offering for the company.
asked the head of the broker
According to the Standards, the head of the brokerage unit would be permitted to: (2 points)
b. Place the company on a restricted list and give only factual information about the company.
c. Assign a new analyst to decide if the stock deserves a higher rating.
Choice b is correct. From the CFA Code of Ethics and Standards of Professional Conduct,
nt
asic
format and general principles of the investment processes they use to analyze investments, select securities, and construct
po
CMT( ) Level III Exam 2 / 16
