2020年cfa经典题讲解

JasonLocke,CFA,hasrecentlybeenhiredastheChiefInvestmentOfficeroftheEscarpmentRegionalernmentEmployees’PensionFund(theFund).Currently,heisconductingevaluationsofallexternalmanagersemployedbytheFundtoensurethattheyareprovidingthehighestpossiblereturnsfortheirmandates,whilecomplyingwithallapplicablelawsandregulations.

LockeisevaluatingtheactivityofNiagaraGrowthManagers(NGM),alocalmoneymanagerallocated10percentoftheFund’sassets.Herealizesthatanyreductionintheallocationtothislocalmanagerwillbemetwithconsiderablepoliticalpressure.Theinvestment statement(IPS)forNGM’sportionoftheFund’sassetsstatesthatNGMistoactivelymanageanequityportfoliooflocalsmall-cap,high-techcompanies.

UponhisreviewofNGM’sactivity,Lockeisconcernedabouttwoitemsthathewouldlikeexined.AtameetingwithNGM’sportfoliomanager,EmmaBlack,CFA,Lockeaskshertocommentoneachitem:

CommoditiesPositions

Locke:“Overthelastyear,severallargepositionsommoditieshavebeen

takenbytheFund’sportfolio.ThisisonsistentwiththeIPS.”

Black:“Commoditieshavesignificantlyoutperformedhigh-techequitiesrecently.Iaddedcommoditiestolargers’portfoliosonatemporarybasis. swerenotinformedbecausethepositionswillbesoldoncemarketimentshifts.Ihavenotmanagedcommoditiesbefore,butIamgettinggoodreturns.”

Locke:“Iamuncomfortablewiththeseinvestmentsinthisportfolio.”

IPOShareAllocation

Locke:“TheFund’sportfolioreceived50,000sharesofaninitialpublicoffering(IPO)on1April.On15May,30,000shareswereremovedatthecurrentmarketprice.”

Black:“TherewasaproblemwithNGM’sIPOallocationalgorithm.Initially,youwereover-allocatedandwhenwediscoveredtheerror,youraccountwasadjusted.”

Locke:“Short-terminterestshouldhavebeencreditedtotheFundforuseofitscashtocoverthetrade.Inanycase,thiswasanIPOofalargeinternationalhigh-tech .Itwasnotanappropriateinvestmentfortheportfolio.”

Afterthemeeting,LockeisnotsatisfiedwithBlack’scommentsanddecidesthatfurtheractionisrequired.HealsodecidesthathewillallowNGMtocontinuetomanageFundassetsuntilhefinisheshisevaluation.ThisdecisionisbasedonthesuperiorreturnsoftheNGM-managedassets,thesignificantdiversificationthisportfolioaddstotheFund,andalsothepoliticalimplicationsoffiringthelocalmoneymanager.

Thenextweek,LockecallsBlackandoutlinesseveralconditionsthatmustbefulfilledforNGMtocontinueasamanagerfortheFund.Oneoftheconditionsoutlinedrelatestotradeallocations.

TradeAllocation

Locke:“ProvidewrittentradeallocationproceduresconsistentwiththeCFA

InstituteStandardsofProfessionalConduct.”

Black:“Iwillmailyouacopyofournewproceduresstatingthattradeallocationsmustbereviewedat ofea onth s’IPS.Italsosaysthatinterestwillbecreditedtoaccountsthathavebeenorrectlyallocatedsharesanddebitedfromthoseaccountsthatshould

havereceivedshares.”

Withhisevaluationcomplete,Lockemustnowconsiderwhethertoretain

NGMasoneoftheFund’sassetmanagers.

AccordingtotheCFAInstituteStandardsofProfessionalConduct,LockeoweshisprimarydutyofloyaltyinmanagingtheFundto:

the ntrustees.

allofthepension nbeneficiaries.

theEscarpmentRegional ernment.

Answer:B.

Locke’sprimarydutyistohis s.Inthecaseofapension n,the

sarealloftheultimatebeneficiaries.

Withrespecttothecommoditiespositions,whichofthefollowingactionsbestdescribesBlack’sviolationoftheCFAInstituteStandardsofProfessionalConduct?BlackviolatedCFAInstituteStandardsby:

buyinganassetclassinwhichshehasnopriormanagementexperience.

buyingassetsthatareonsistentwiththeportfolio’sInvestmentStatement.

failingtonotifythe that dtemporarilydeviatefromthe’sInvestment Statement.

Answer:B.

Undernocircumstancesshouldamanagertakeinvestmentactionthat

is onsistentwiththe ’sIPS.

WithregardtotheIPOshareallocation,arebothNGM’smethodoftradecorrectionon15MayandLocke’sdemandforashort-terminterestcredit,respectively,consistentwiththeCFAInstituteStandardsofProfessionalConduct?

Yes.

No,onlythemethodoftradecorrectionisconsistent.

No,onlythedemandforashort-terminterestcreditisconsistent.

Answer:C.

Locke’sinterestclaimislegitimatesetheFund’scashwasemployedtopurchaseequitiesthatwerelaterremovedfromtheaccount.Therefore,theFundisowedinterestfortheperiodinquestion.

AfterhisinitialmeetingwithBlack,doesLocke’sdecisiontoallowNGMtocontinuemanagingtheportfolioviolatetheCFAInstituteStandardsofProfessionalConduct?

No.

Yes,becauseheallowedpoliticalfactorstoinfluencehisdecision.

Yes,becauseheisobligatedtoimmedia ysuspendNGMuntilhefinisheshisevaluation.

Answer:A.

UntilLocke’sinvestigationiscomplete,hehasnoobligationtosuspendthemanagerortakeanyotheraction.Hebelievesthemanagercananddoesaddvaluethroughsuperiorreturnsanddiversification,andthereforeitmaybereasonabletoretainNGMifLockecanbesatisfiedthatthemanagercanactwithintheconstraintsoftheIPSandCFAInstituteStandards.Untiltheysisiscomplete,itwouldnotbepractical,andLockewouldbeviolatinghisdutytoactinhiss’bestinterestsbysuspendingthemanagerandleavingtheassetsunmanagedortotemporarilymovingthemtoanothermanagerforsafe-kee.

WithregardtoLocke’sconditionregardingtradeallocation,doesBlack’sresponseviolatetheCFAInstituteStandardsofProfessionalConductwithrespecttoallocationreviewsandinterestadjustments,respectively?

Yes.

No,itviolatesthestandardsonlywithrespecttoallocationreviews.

No, it violates the standards only with respect to interestadjustments.

Answer:A.

suitabilityforaninvestmentmustbereviewedpriortoallocation,notafterward.Withrespecttointerestadjustments, swhowereorrectlyallocatedsharesmustbepaidfortheuseoftheircash;however,innoinstanceshould ssufferalossbecauseofanallocationerrorbythemanager(thatis,haveinterestremovedfromtheirportfolioeventhoughsharesareputintheiraccountonaback-

datedbasis).

Basedonhiscompleteevaluation,whatisLocke’sbestcourseofaction

withrespecttoNGM’smanagementoftheFund’sassets?

ReduceNGM’sallocationoftheFund’sassetsuntilNGMhasdemonstrateditscompliancewithLocke’sconditions.

EliminateNGMasamanagers eLockecannotbesurethat

NGMwillactfairlyandinaccordancewiththeFund’sIPS.

MaintainNGM’sallocationoftheFund’sassetsandconcentrateonevaluatingmanagerswithlargerproportionsoftheFund’sassetsorwithsub-standardperformance.

Answer:B.

Lockehasadutytothepensionnbeneficiariestoactintheirbestinterests.Hewouldbeviolatingthatdutyifhecontinuestoemployamanagerwhodoesnotmanageitsmandateordemonstratethatitisawareofandcomplieswithitsowndutiesto s.Hemustdemonstratehisownprofessionalcompetencebyfiringthemanager.

EliasNano,arecentMBAgraduateandaCFALevelIIcandidate,isanunpaidsummerinternwithPatriarchInvestmentCounselandexpectstobeofferedafull-timepaidpositioninthefall.Throughhisefforts,heisabletoconvesomefamilymembersandfriendstobecomesofthefirm,andhenowassistswiththemanagementoftheiraccounts.Hissupervisorcongratulateshimandstates:“Thesesarethefoundationfromwhichyouwillbeabletobuildyourcareerasaninvestmentadvisor.”Afterworkinghardallsummer,NanoistoldthatPatriarchwillnotbeabletoofferhimapaidposition.

Nanointerviewswithanumberoffirms,andlseachoneabouttheaccountsthatheismanagingandexpectstobeabletobringwithhim.BecausehewasmerelyaninternatPatriarch,hedoesnotthinkheowesanyparticularloyaltytoPatriarch.HegainsfurtherassurancethathecankeepthesfromthefactthathisformersupervisorimpliedthatthesewereNano’ss.

NanosubsequentlyjoinsMarkoeAdvisorsasanassistantdirectorwithsupervisoryresponsibilities.MarkoeAdvisorsisaninvestmentmanagementfirmthatadvertisesthatitprovidescustomizedportfoliosolutionsforindividualandinstitutional s.Asamatterof ,Markoedoesnotrejectasa anyindividualmeetingtheaccountminimumsize.Markoehastwostrategies—aggressivegrowthequityandgrowthequity—andisalwaysfullyinvested.NanoaskshisfamilyandfriendstotransfertheiraccountsfromPatriarchtoMarkoe.

AsthefirstCFAcandidatetobeemployedbyMarkoe,Nanohasbeenaskedtoheadateamthatisreviewingthefirm’scompliancepoliciesandprocedures,whichNanoconsidersinadequateandomplete.Hestateshisconcernsto Markoe:“AlthoughMarkoeAdvisors,asafirm,cannotadopttheCFAInstituteCodeofEthicsandStandardsofProfessionalConduct,thefirmcanadopttheCFAInstituteAssetManagerCodeofProfessionalConduct.” MarkoelsNanothatthefirmisconsideringacquiringanotheradvisoryfirmthathassimilarcompliancepoliciesandprocedures.Markoesays:“Wearenotgoingtoconsideranycompliancechangesatthistime.”

Nanodecidestodraftamodelcompliance toguidediscussionsaboutcomplianceissuesatthefirminthefuture.Nano’sinitialdraftludesthefollowingcomponentsofacompliance statement:

PerformancePresentation

Performancedatamustbe edforeachofMarkoeAdvisors’activeaccounts,bediscloseduponrequest,andbecomparedwiththefirm’scomposite,whichiscomposedofactiveaccountsonly.Performancedatamustbepresentedonabefore-taxbasistoalls,withthedisclosurethatallperformancedataarepresentedgrossoffees.

SuitabilityofInvestments

MarkoeAdvisors,tomaintaonsistencyofperformance,assignseach tooneofthefirm’stwoportfolios.Bothoftheseportfoliosaresufficientlybroadlydiversifiedtomeettheinvestmentobjectivesofallofours.

Disclosuresof s

MarkoeAdvisorsencouragesitsstafftobeinvolvedinthebusinessandciviccommunity.Onlybusinessorcivicintereststhatrelatetocurrentportfolioholdingsneedtobereportedtothefirm.

Violations

AnyviolationoftheMarkoeAdvisorscompliance statementwillbereportedtothe ,andemployeeswillreceiveanofficialwarning.

Compensation

AllstaffmembersofMarkoeAdvisorswilldiscusswiththeirsupervisoralloutsidecompensationthattheyarereceivingormayreceive.

DoesNanocomplywiththeCFAInstituteStandardsofProfessionalConductwhenheaskshisstotransfertheiraccountstoMarkoeAdvisors?

No.

Yes,becausehecontactedthe safterleavingPatriarch.

Yes,becausehewasaninternandnotapaidemployeeofPatriarch.

Answer:B.

StandardIV(A)prohibits employees from soliciting the s ofemployerspriorto,butnotsubsequentto,theirdeparture.

IsNano’sstatementwithrespecttoadoptionoftheCFAInstituteCodeofEthicsandStandardsofProfessionalConductandtheCFAInstituteAssetManagerCodeofProfessionalConduct,respectively,correct?

CFAInstituteCodeandStandards

CFAInstituteAssetManagerCodeofProfessionalConduct

No No

No Yes

Yes No

Answer:B.

TheCFACodeandStandardsapplytoindividualmembersandcandidatesofCFAInstitute,butfirmsareencouragedtoadopttheCodeandStandardsaspartoftheirfirmcodeofethics.TheCFAInstituteAssetManagerCodeofProfessionalConducthasbeendraftedspecificallyforfirms.

AccordingtotheCFAInstituteCodeandStandards,wh tionshould

Nanotakeafterdiscussingthefirm’scompliance with

Markoe?Nanoshould:

resignfromthefirm.

notifyth ofdirectors.

decl oacceptsupervisoryresponsibilities.

Answer:C.

StandardIV(C)statesthatthememberorcandidateshoulddeclineinwritingtoacceptsupervisoryresponsibilityuntilthefirmadoptsreasonableprocedurestoallowhimtoadequayexercisesuchresponsibility.

DoesNano’sdraftcompliance statementconformtotheCFAInstituteCodeandStandardswithrespecttoperformancepresentation?

No,becauseterminatedaccountsareexcluded.

No,becauseperformanceisreportedtoall sgrossoffees.

No,becauseperformancedataarepresentedonabefore-taxbasis.

Answer:A.

StandardIII(D)statesthatbothterminatedandactiveaccountsmustbe ludedaspartoftheperformancehistory.

DoesNano’sdraftcompliance statementconformtotheCFAInstituteCodeandStandardswithrespectto:

suitabilityofinvestments? disclosuresofs?

No No

No Yes

Yes No

Answer:A.

Bycingallsinoneofthetwospecializedportfoliositoperates,MarkoeAdvisorsisnotgivingadequateconsiderationtotheindividualneeds,circumstances,andobjectivesofeach asrequiredbytheStandards.Inaddition,theStandardsrequirethatmembersandcandidatesdiscloseallactualandpotential sofinterest,notjustthosethatrelatetocurrentportfolioholdings.

statementconformtotheCFA

DoesNano’sdraftcompliance

InstituteCodeandStandardswithrespectto:

violations? compensation?

No No

No Yes

Yes No

Answer:A.

TheStandardsrequirethatthesupervisorpromptlyinitiateaninvestigationtoascertaintheextentoftheviolationandshouldtakestepstoensurethatviolationswillnotberepeatedbylimitingormonitoringtheemployees’activities.TheStandardsalsorequirethatmembersandcandidatesobtainwrittenpermissionfromtheiremployerbeforeacceptinganycompensationorbenefitsfromthirdpartiesthatmaycreatea ofinterest.

PatriciaJollie,CFA,isthefixed-omeystandportfoliomanageratMahsudFinancialCorporation,asmallinvestmentfirm.

On5April,afriendwhoworksforabond-ratingagencymentionstoJolliethatabond ncyisyzingwillexperiencearatingchange.ThatbondalsohappenstobeinMahsudFinancial’sportfolios.Notwgtotradeaheadoftheratingchangeannouncement,Jolliedecidestowaitfordistributionoftheinformationthroughherfriend’sscheduledinterviewonabusinessevisionprogramtheafternoonof8April.Onthemorningof8April,theinformationisreleasedonaworldwidefinancialnewsservice.JollieimmediaychangeshermindaboutwaitingfortheinterviewandtradesthebondsinMahsudFinancial’sportfolios.

On8April,JolliealsotradesasecondbondtorebalanceoneofMahsudFinancial’sportfolios.Jollieknowsbeforeexecutinghertransactionthatthebondisthinlytraded.AlthoughJollie’stradewillmateriallyaffectthebond’smarketprice,itisnotherintentiontocreatepricemovement.Acolleaguewitnessesthetradeandlargebondpricechangeandsays,“Whatamarketoverreaction;thebondpriceappearstobedistortednow!”ThecolleaguealsopointsouttoJolliethatMahsudFinancial’s onmarketmanipulationstates:“MahsudFinancialemployeesmustrefrainfrommakingtransactionsthatdistortsecuritypricesorvolumewiththeintenttomisleadmarketparticipants.”

In conducting fixed- ome research, Jollie believes that insight intoprospectivecorporatebondreturnscanbederivedfrominformationthatis

alsorelevanttoa ’sstock.Shespendsseveralhoursaweekin

equityinvestmentchatroomsontheinte ,andshepaysparticularattentiontotheresearchreportspostedbyJillDean,CFA,aself-employed

yst,on .Priortowriting

eachreport,Deanispaidaflatfeebythecompanieswhosestockssheresearches,butshedoesnotrevealthisfacttoreadersofherreports.Sheproduces reports only for those companies whose stocks she canlegitima ygive“buy”recommendationsafterconductingathoroughysis.Otherwise,shereturnstheflatfee.Investorshavecometo

recognizeallher“buy”ratingsashavingasoundandreasonablebasis.

JollieconsidersDean’ssummariesandforecaststobeverywell-crafted.DeanhasgivenJolliewrittenpermissiontousehersummariesandforecasts,wordforwordandwithoutattribution,inherownbondysisreports.Onoccasion,Jolliehasdoneso.InDean’sotherintepostings,shereportstheresultsofrelevantacademicfinancestudies.OnceJollielearnsofastudybyreadingDean’spostings,sheoftenreadstheoriginalstudyandmentionstheresultsinherownreports.JolliealwayscitestheoriginalstudyonlyanddoesnotrevealthatshelearnedofthestudythroughDean.

MahsudFinancialoccasionallysponsorsseminarsonethics.Inthemostrecentseminar,themainspeakermadestatementsabouttherelationshipbetwehicsandthelaw,andalsoaboutpotentialsourcesof ofinterestforresearchysts.Theseminarspeaker’sstatementswere:

Statement1:Anillegalactionishical,andactionsthatarelegalareethicallysound.

Statement2:Forysts,amajorsourceof ofinterestispotentialprofitresultingfromaweakbarrierbetweentheemployer’sresearchdepartmentandinvestmentbankingdepartment.

Statement3:Forsituationsinwhich sofinterestcannotbeavoided,MahsudFinancial’swrittencompliance shouldludethefollowingcomponent:“Forunavoidable sofinterestthattheemployeejudgestobematerial,employeesmustdisclosethe sofinteresttosprominently,andininlanguage.”

Statement 4: Onthematterofgiftsthatmightimpairemployees’objectivity, Mahsud Financial’s written compliance should alsoludethefollowingcomponent:“EmployeesmustdisclosetoMahsud

Financialall giftsregardlessofvalue.”

DoesJollieviolatetheCFAInstituteStandardsofProfessionalConductbytradingonthenewsofthebondratingchange?

No.

Yes,onlybecauseshepossessedmaterialnonpublicinformation.

Yes,onlybecausesheshouldhavewaitedtotradeuntilafterher

friend’s evisioninterviewtook ce.

Answer:A.

Jolliedidnotactonthematerialnonpublicinformationshepossessedbutwaiteduntilitbecamepublic.AccordingtotheStandardsofPracticeHandbook,“Itisnotnecessary…towaitfortheslowestmethodsofdelivery.”

AreJollie’s8ApriltradeofthesecondbondandMahsudFinancial’s

onmarketmanipulation,respectively,consistentwithCFAInstituteStandardsonmarketmanipulation?

BothJollie’s8ApriltradeofthesecondbondandMahsudFinancial’s

onmarketmanipulationareconsistentwithCFAInstituteStandards.

Jollie’s8ApriltradeofthesecondbondisonsistentandMahsudFinancial’s onmarketmanipulationisconsistentwithCFAInstituteStandards.

Jollie’s8ApriltradeofthesecondbondisconsistentandMahsudFinancial’s onmarketmanipulationisonsistentwithCFAInstituteStandards.

Answer:A.

Jollie’stransactionisalegitimatemarketorderinathinly-tradedsecurity,andMahsudFinancial’s statementisconsistentwithCFAInstituteStandardsrelatingtotheIntegrityofCapitalMarkets.

Does Dean violate CFA Institute Standards in preparing anddisseminatingherequityreports?

No.

Yes, only by misrepresenting her recommendations ast.

Yes,onlybyacceptingpaymentfromthecompaniesonwhichsheproducesreports.

Answer:B.

Itisnotaviolationtoacceptcompensationfromanissuerinexchangeforresearchbutsucharrangementsmustbedisclosedprominentlyandininlanguage.

Inpreparinginvestmentreports,doesJollieviolatetheCFAInstituteStandardswithrespecttoher:

useofDean’ssummariesandforecasts?

citationofstudiesfoundin

Dean’sinte postings?

No Yes

Yes No

Yes Yes

Answer:B.

ReceivingDean’swrittenpermissiondoesnotabsolveJollieofherresponsibilitytoprovideattribution.BecauseJollieusestheresultsoftheresearchstudiesanddoesnotuseDean’sinterpretationofthestudies,itisappropriatetocitetheoriginalauthorsonly.

Aretheseminarspeaker’sStatements1and2,respectively,correct?

Statement1 Statement2

No No

No Yes

Yes No

Answer:B.

Thefirststatementisorrectandthesecondstatementiscorrect.Whatislegalisnotnecessarilyethical.Aweakbarrierbetweentheemployer’sresearchdepartmentandinvestmentbankingdepartmentisapotentialsourceof s.

Aretheseminarspeaker’sStatements3and4,respectively,sufficienttomeettherequirementsofrelatedCFAInstituteStandards?

Statement3 Statement4

No No

No Yes

Yes No

Answer:B.

Statement3isorrect.Thedisclosureofa shouldbemade—prominentlyandininlanguage—regardlessofwhetherthememberviewsthe asmaterial,sothe candeterminethematerialityofthe .Statement4isincompliancewithCFAInstituteStandards.TheMahsudFinancialdisclosurerequirementmeetsCFAInstituteStandards.Giftsfromsshouldbedisclosedtotheemployer,whichisresponsiblefordeterminingwhetherthegiftcouldaffecttheemployee’s ceandobjectivity.

StaciaFinnegan,CFA,managesaregionalofficeofHarvestFinancial’sbrokeragebusiness.Herresponsibilitiesludetrainingall nelincompliancewiththefirm’sstandards,policies,procedures,andapplicablelawsandregulations.

Finneganiscurrentlyprovidingtrainingonthefirm’snewPlusAccount,acomprehensivefee-basedbrokerageaccount.“PlusAccounts,”she lsthebrokers,“areanexcellentwaytoensurethatthefinancialadvisordoesnotrecommendtradesforthepurposeofgeneratingcommissions.Theadvisorand ’sinterestsarealigned.”Shecontinues,“Youwillfindthatmanyswillbenefitfromconvertingatraditionalbrokerageaccounttoa

PlusAccount.

Beaware,however,thatPlusAccountsarenotappropriateforallcategoriesofinvestors, ludingbuy-and-hold sandcerta lientswithassetslessthan$50,000.”FinnegandistributeswrittencomplianceproceduresforestablishingandmaintainingPlusAccounts.Shecarefullyex insthatregulatoryrules“requirethatwehavereasonablegroundsforbelievingthatthePlusAccountisappropriateforaparticularcustomer.Additionally,wemustrevieweachaccountonanannualbasistodeterminewhetherPlusAccountstatusremainsappropriate.Thepoliciesoutlinedinthesesaredesignedtoensurecompliancewithindustrystandardsandregulatoryrequirements.Youmustfollowthesecomplianceprocedures

exactly.”

Finneganthendistributesandex insthesalesanddisclosurematerialsfor s.Thematerials ludethefollowingfeestructure:

PlusAccountAnnualFee(asaPercentofAssets)*

AccountAssetLevel

Equity(%)

MutualFund/Fixedome(%)

From0–$250,000

2.00

1.00

Next$250,000

1.50

1.00

Next$250,000

1.25

1.00

Next$250,000

1.00

1.00

Morethan$1million

0.75

0.75

*Minimumannualfeeof$1,000billedquarterly.

Finneganspendstherestoftheafternoontrainingthestaffondetailedproceduresandansweringtheirquestions.

ChrisKleinisa brokerandfinancialadvisorwithHarvest.HeisalsoaLevelIICandidateintheCFAProgram.KleinicitedaboutthenewPlusAccountsandbelievesthattheywillbeattractiveformanys.

OneofKlein’ssisElaineVanderon,whocontributesweeklytoherbrokerageaccount.UnderVanderon’sdirections,Kleininveststheweeklycontributionsinactivelymanagedmutualfunds(unittrusts).Thefundshavebelow-averagemanagementfeesandaveragereturns.CommissionsforVanderoage$35pertransaction.

WhenVanderon’saccountreaches$50,000inassets,KleinrecommendsconversiontoaPlusAccount.HecarefullyexinsthatinaPlusAccount,boththecostofinvestmentadviceandmanyimplementationcostsarewrappedintothemanagementfeebilledonaquarterlybasis.Stockandbondcommissions,helsVanderon,arediscountedby70%.KleininformsVanderonthatinaPlusAccount,shecanbuyorsellthousandsofmutualfundsorunittrusts(ludingthoseinwhichsheinvests)fornocommissionsortransactioncharges.HeexinsthatPlusAccountsareidealfor swhotradeoften—oraspartofaperiodicinvestmentprogramsuchashers.VanderonreadsthroughthedisclosurematerialprovidedbyKleinandacceptshisrecommendation.

KleinroutinelyinformssaboutthebenefitsofPlusAccountstatusandpresentsthemwithallthedisclosurematerials.Another KleinencouragestoopenaPlusAccountisLeeBrown.Brownhasaccumulatedstockholdingsof$300,000andtradesequitiesalmostdaily.Hisannualcommissionsfortheprevioustwelvemonthsequal$9,100.Hisportfolioiswell-diversified.Hehasahighrisktoleranceandprefersgrowthstocks.Afterexiningthefeestructure,KleinlsBrown“ThePlusAccountisidealforanactivetraderlikeyou.”

Oneyearlater,Finneganispromoted.ShedelegatessupervisoryresponsibilityforKleinand15otherbrokerstoherassistantbranchmanager.

Thesamemonth,KleinmeetswithVanderonandBrowntoreviewtheirportfolios and financial situations. Both s are happy with theirPlusAccounts.Vanderon’scommissioncostshavedeclinedtozero.Heraccountcontinuestogrowinlinewithher nsandexpectations.Brownisalsohappywithhisaccount.Hisannualcommissioncostshavedeclined70%to$2,700.

Twomonthslater,Vanderonreceivesa$1millioninheritanceandcesitinherPlusAccount.Althoughheconductedafullreviewtwomonthsearlier,KleinmeetswithVanderontoreviewherfinancialsituationanddiscusspotentialchangestoherinvestment .Duringtheirmeeting,KleinmentionsthathehascompletedLevelIIIoftheCFAexamination.HeinformsVanderon“CompletionoftheCFAProgramhasenhancedmyportfoliomanagementskills.”HelsVanderon“AsaCFAcharterholder,Iamthebestqualifiedtomanageyourinvestments.”VanderoncongratulatesKleinonhisaccomplishmentandagreestoconsideranychangesherecommendstoherPlusAccount.

Thefollowingmonth,Klein ephonesVanderontorecommendahighly-ratedmutualfund.Kleinstates“Thefundhasanexcellentperformancehistoryandisrankedinthetopdecileofcomparablefunds.Forthepastthree-andfive-yearperiods,itsaverageannualreturnha ceededtheben ark by 90 basis points. Of course, past performance is noguaranteeoffuturereturns,butseveralofmy sholdthisfundandtheyareallveryhappywithit.Oneoftheminvested$50,000fiveyearsago.Thatinvestmentisworthmorethan$100,000today.”WhenVanderonasksaboutfees,Kleinex insthatthefund’smanagementfeesare25basispointshigherthanthoseofherexistinginvestments.Headds“BecauseofyourPlusAccountstatus,youwon’t urabrokeragecom