CFA Investment Foundations C2

Maintaining high ethical standards in the investment industry will most likely result in: decreased market efficiency. fewer conflicts of interest. increased market participation.

Maintaining high ethical standards in the investment industry will most likely: increase the fairness of financial markets. decrease the stability of the financial system. decrease the complexity of financial markets.

Which of the following most likely represents potential violation of ethical principles due to a conflict of interest?. An analyst writes a research report about a company for which he owns a significant number of shares. A financial salesperson, who sells specific investment products, recommends an investment product to a client and is paid a commission on the sale. An employee sells her own shares of a company after placing a client’s order to sell shares of the same company.

In fulfilling obligations to their employer, employees should: be careful in carrying out their responsibilities. accept and diligently complete any assigned task. balance their personal interests with their employer’s interests.

If the required structural and procedural controls have not been established, then an employee should: refrain from assuming supervisory duties. notify the appropriate regulatory authorities. perform their supervisory duties with utmost care.

Which of the following outcomes of acting with high ethical standards will most likely directly benefit both clients and investment professionals?. Enhanced employment security. Reduced risk of adverse legal consequences. Increased trust in the fairness of financial markets.

For individuals working in the investment industry, ethical standards are most needed when: legal obligations are ambiguous. market innovations are infrequent. different jurisdictions have unambiguous and similar laws.

According to fundamental ethical and professional principles applicable to the investment industry, which group should have their interests ranked first?. Clients. Employers. Co-workers.

The fundamental ethical principle to act with independence and objectivity is best upheld when: client confidentiality is maintained. personal education and professional development are undertaken. work and opinions are unaffected by any potential conflict of interest.

According to fundamental ethical and professional principles for the investment industry, trading on insider information on behalf of clients is: not allowed. allowed only if the trade benefits the client. allowed only if the trade is disclosed as a conflict of interest.

Which of the following is most likely a potential effect of unethical behaviour by people in the investment industry?. Increased employment. Decreased economic output. Decreased regulatory scrutiny.

Unethical behaviour by investment professionals may lead to higher: employment. long-term growth expectations for the economy. cost of capital for those companies requiring capital.

The last step in an ethical decision-making process should be to: assess how a decision turned out and learn from it. assess how others might view a possible course of action. determine whether the decision is affected by outside factors.

A breach of ethical standards most likely results in: higher public trust. reduced financial market efficiency. fulfilment of clients’ investment goals.

According to fundamental ethical and professional principles for the investment industry, conflicts of interest with: clients should be avoided. clients and employers should be avoided. clients and employers should be avoided or disclosed.

Decreased cost of capital may lead to the growth of: only the investment industry. only companies seeking capital in financial markets. the investment industry, companies seeking capital in financial markets, and the overall economy.

Which of the following best describes an internal factor that could affect judgment in ethical decisions?. Incentives. Rationalization. Authority figures.