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CFA Level 1 Exam

3959 Questions

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Question No. 1

Andrea Anastasio heads the research wing at HiLo Funds, Ltd., an investment advisory and money

management firm. Andrea was recently informed by one of her junior analysts, Marcus Cambus, that the
investment recommendation on HotPots food chain stock needed an immediate downgrade from hold to sell. This was based on talks with HotPots' management whom revealed that HotPots would be launching an ill-advised expansion plan soon (this information has been discussed in the financial newspapers, too). Andrea checked Marcus' analysis and agreed with the conclusions. Deciding to include this in her research newsletter, Andrea informed a few of the portfolio managers about the change. She did warn them that no action on the news should be taken before the newsletter was out for at least 4 days. However, Cotler, one of her subordinates and an AIMR member, inadvertently and prematurely sold off a large chunk of the holdings of Hotpots stock in one of his larger accounts. A month-end review of accounts DID NOT catch the violation. Which of the following is/are true?
I. Andrea has not violated any AIMR code but Cotler has violated Standard III (B) - Duty to Employer.
II. Andrea has violated Standard III (E) - Responsibilities of Supervisors.
III. Cotler has violated Standard V (A) - Prohibition against Use of Non-Public Information.
IV. Cotler has violated Standard IV (B.3) - Fair Dealing.
Choose the correct option from the given list.
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