Question #12

Reading: Reading 43 Application of the Code and Standards Level II

PDF File: Reading 43 Application of the Code and Standards Level II.pdf

Page: 8

Status: Incorrect

Correct Answer: B

Your Answer: C

Part of Context Group: Q11-12
Shared Context
- Which of the following statements about O'Brien's use of convertible bonds is CORRECT? A) O’Brien’s lack of expertise in equity analysis, despite usage of the CFA mark, represents a violation of Standard VII(A): Conduct as Members and Candidates in the CFA Program. B) The use of convertible bonds in O’Brien’s high-yield fund violates Standard V(A): Diligence and Reasonable Basis. C) Unless O’Brien makes arrangements for someone else to vote the proxies, he is in violation of Standard III(A): Loyalty, Prudence, and Care.
Question
O'Brien's money-market allocations represent:
Answer Choices:
A. reasonable actions, as they simply reflect the nature of his compensation
B. a violation of Standard III(B): Fair Dealing
C. a breach of his fiduciary duty to mutual-fund account owners
Explanation
O'Brien breached his fiduciary duty to private-account holders, but not to owners of the fund. He did violate the fair-dealing Standard by attempting to boost his compensation.
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