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With Respect To Reporting Investment Results

Soprano is violating the GIPS Standards by not disclosing the fundamental research aspect of its investment process to clients. This aspect is highly relevant to understanding how investment decisions are made. Tripp, as supervisor of analysts, may delegate supervisory duties to both Green, who is subject to the CFA Institute Standards of Professional Conduct, and Brown, who is not subject. Such delegation does not relieve Tripp of his supervisory responsibilities. Valley must inform his supervisor of his unpaid position on a board for an organization that promotes cancer research and describe his responsibilities, as this could affect his analysis of pharmaceutical firms.

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50 views2 pages

With Respect To Reporting Investment Results

Soprano is violating the GIPS Standards by not disclosing the fundamental research aspect of its investment process to clients. This aspect is highly relevant to understanding how investment decisions are made. Tripp, as supervisor of analysts, may delegate supervisory duties to both Green, who is subject to the CFA Institute Standards of Professional Conduct, and Brown, who is not subject. Such delegation does not relieve Tripp of his supervisory responsibilities. Valley must inform his supervisor of his unpaid position on a board for an organization that promotes cancer research and describe his responsibilities, as this could affect his analysis of pharmaceutical firms.

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Vidaup40
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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With respect to reporting investment results, Global Investment Performance Standards (GIPS) require a minimum of:

A.five years of historical performance.

B. three years of historical performance.

C. ten years of historical performance.


Janice Melfi is a portfolio manager for Soprano Advisors. Soprano has developed a proprietary model that has been
thoroughly researched and is known throughout the industry as the Soprano model. The model is purely quantitative and
screens stocks into buy, hold, and sell categories. The basic philosophy of the model is thoroughly explained to clients. The
director of research frequently alters the model based on rigorous research—an aspect that is well explained to clients,
although the specific alterations are not continually disclosed. Portfolio managers use the model to assist them in making
portfolio decisions, but, based on their own fundamental research, are allowed to purchase securities not recommended by
the model. This fact is not disclosed to the clients, because the head of marketing does not think it is relevant. Which of the
following statements regarding the portfolio manager's investment decisions is CORRECT?

A. There is no violation of the Standards.

B. Melfi is violating the Standards by using two investment processes that are in conflict with each other.

C. Soprano is violating the Standards by not disclosing the fundamental research aspect of the investment process

Soprano is violating the Standard on portfolio investment recommendations and actions by excluding relevant factors of
the investment process. The fundamental research aspect is highly relevant to the process and should be disclosed to
clients. It is acceptable for Melfi to use two investment processes that may be in conflict with each other and to use a
process that was not developed by her.

(Study Session 1, Module 3.7, LOS 3.a, 3.b, 3.c)


Martin Tripp, CFA, is vice-president of the equity department at Walker Financial, a large money management firm. Of the
twenty analysts in his department for whom he has supervisory responsibility, eight are subject to CFA Institute Standards
of Professional Conduct. Tripp believes that he cannot personally evaluate the conduct of the twenty analysts on a
continuing basis. Therefore, he plans to delegate some of his supervisory duties to Sarah Green, who is subject to the
Standards, and some to Bob Brown, who is not subject to the Standards. According to CFA Institute Standards of
Professional Conduct, which of the following statements about Tripp's ability to delegate supervisory duties is  most
accurat

A. Tripp may not delegate any of his supervisory duties to either Green or Brown

B. Tripp may delegate some or all of his supervisory duties to Brown, even though Brown is not subject to the Standards.

C. Tripp may delegate some or all of his supervisory duties only to Green because she is subject to the Standards.

Standard IV(C) Responsibilities of Supervisors permits Tripp to delegate supervisory duties to Green, Brown, or both, but
such delegation does not relieve Tripp of his supervisory responsibility.

(Study Session 1, Module 3.6, LOS 3-IV.(C))


Bill Valley has been working for Advisors, Inc., for several years, and he just joined CFA Institute. Valley routinely writes
research reports on Pharmaceutical firms. Valley has recently been asked to serve on the board of directors of an
organization that promotes the search for a cure of a certain cancer. Serving on the board is an unpaid position without any
direct benefits other than meeting new people and potential clients. To comply with Standard VI, Disclosure of Conflicts,
Valley needs to:

A. only disclose the position on the board to his supervisor.

B. both disclose the position on the board to his supervisor and describe his responsibilities on the board.

C. do nothing.

Valley could be affected by his position on the board because he may tend to favor investments in firms that do cancer
research. To comply with Standard VI(A), Disclosure of Conflicts, Valley must inform his supervisor of this relationship and
describe his responsibilities on the board. Even if his supervisor does not find the relationship troublesome, any subsequent
action that could lead to a conflict of interest should be discussed with the firm's compliance officer.

(Study Session 1, Module 3.8, LOS 3-VI.(A))


Jean Davis and Brian Taylor were recently hired by a local brokerage. Davis is registered for the Level II CFA exam and
does not reference the CFA designation on her business card. In her marketing materials, Davis factually describes CFA
requirements and notes that she expects to pass in June. Taylor passed the Level II exam and has not yet registered for the
Level III CFA exam. Taylor also does not reference the CFA designation on his card and writes in his marketing materials
that he passed both Levels I and II of the CFA exam on his first try, which is true. Have Davis or Taylor violated any CFA
Institute Standards of Professional Conduct?

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