Level III SS & Item Set Quiz (6 questions, 18 minutes) Jane Grant, CFA is a fund manager at Global Assets LLC and currently manages a fund which focuses on the pharmaceutical industry Outside of work, Jane designs clothes for a few close friends for a nominal fee She does not disclose this outside business activity activity to her employer or clients The fund managed by Jane invests in small-cap, small cap, publicly traded companies and is recommended only for investors who are able to assume a high level of risk Six months ago, Jane invested in MiraclePro, a pharmaceutical company focusing on medicines and treatments for cancer and other terminal illnesses A year ago, MiraclePro’s market capitalization doubled shortly after they announced the launch of a drug that successfully treated Alzheimer’s disease Jane tells her cli clients that the fund has been able to benefit immensely from the doubling of MircalePro’s market capitalization One of the founders of MiraclePro, James Welsh, is on the board of Global Assets In the last few months, MiraclePro has launched a number of new products and James Welsh’s information about the launches led Jane to purchase additional stock in MiraclePro before the launch became public in the media Global Assets also has a strategic partnership with a life insurance company, OneLife When the sales les representatives of Global Assets market the firm’s products (mutual funds, annuities, etc.) to the investing public, they also market life insurance policies of OneLife In return for the marketing of their products, OneLife pays Global Assets a 2% commission commission This commission arrangement is not disclosed to clients In addition, the Global Assets sales team frequently receives gifts of nominal value from OneLife To motivate the sales representatives to perform better, Global Assets has decided to hold a competition amongst the representatives to choose the Sales Representative of the Year The winner is determined by the amount of new revenue generated for the firm The prize is a cash award of USD 100,000 While announcing details of the competition, the CEO advises the staff to focus their sales efforts on Global Assets’ front-end front end load funds since they earn the highest fees He also adds that the staff should not disclose this competition to clients In a separate meeting with the board, the CEO announces announces that the firm would benefit by adoption of the Asset Manager Code of Professional Conduct Not only would it encourage ethical and fair practices in the firm but it would also help them increase business volumes During the meeting, the CEO suggests several recommendations that can be implemented to achieve compliance with the Asset Manager Code of Professional Conduct: Recommendation 1:: Global Assets has an investment banking business in addition to its fund management business To avoid any conflicts, conflicts, we should create a separate wholly owned subsidiary to undertake the investment banking business Recommendation 2: We should utilize only one stockbroker in each market to ensure timely and efficient trades in each of the markets the Fund invests in i Copyright © IFT All rights reserved www.ift.world Page Level III SS & Item Set Quiz (6 questions, 18 minutes) Which of the following statements is most likely accurate regarding Jane's actions in relation to her business activity outside of work? Jane is: A Not obligated to disclose these outside business activities because they not present a conflict of interest B In violation of the Code and Standards for not disclosing her outside business activities to her employer C In violation of the Code and Standards by including high risk investments in the fund portfolio assets With regard to the investment in MiraclePro, M Global Assets least likely violated which of the following Standards of Professional Conduct? A Suitability B Misrepresentation C Material Non-public public Information With respect to Global Asset’s relationship with OneLife, which of the following is most likely a violation of the Code and Standards: A Marketing OneLife’s products along with its own B Receiving a commission from OneLife C Not disclosing the commission arrangement to clients and potential clients By participating in Global Asset’s Sales Representative of the Year competition, the sales representatives are least likely to violate the standard with respect to: A Loyalty, prudence and care B Suitability C Additional compensation arrangements Which of the following is most likely correct with respect to Recommendation and the Asset Manager Code? A Recommendation is consistent with the Asset Manager Code B Maintaining the investment banking business, even as a separate subsidiary, is not consistent with th the Asset Manager Code C It is acceptable to maintain both the fund management and investment banking businesses as long as any possible conflicts are clearly disclosed If Recommendation were to be implemented, which aspect of the Asset Manager Co Code would most likely be violated? A Fair dealing B Best execution C Priority of Transactions Copyright © IFT All rights reserved www.ift.world Page ...Level III SS & Item Set Quiz (6 questions, 18 minutes) Which of the following statements is most likely accurate regarding Jane's actions in relation to her business activity outside... Asset Manager Code? A Recommendation is consistent with the Asset Manager Code B Maintaining the investment banking business, even as a separate subsidiary, is not consistent with th the Asset... investments in the fund portfolio assets With regard to the investment in MiraclePro, M Global Assets least likely violated which of the following Standards of Professional Conduct? A Suitability