MCQ Quiz

Question 1 of 21

An analyst receives a cash payment from a broker for recommending the broker's services to clients. Under the CFA Curriculum, the analyst most likely must:

Disclose the payment to employer, clients, and prospective clients as appropriate
Disclose the payment only to the broker
Keep the payment private if the broker's service is good

Question 2 of 21

Which action is a recommended compliance practice for approved referral fee programs?

Give the employer regular updates, at least quarterly, on the amount and nature of compensation
Keep the arrangement informal so no records are needed
Report the arrangement to the employer only if a client complains

Question 3 of 21

A member receives a one-time referral fee for recommending an outside manager. Which description is most accurate?

Disclosure is unnecessary because the fee is one-time
Disclosure is required because one-time benefits are covered
Disclosure is required only if the fee exceeds USD 100

Question 4 of 21

An employer has a policy that completely restricts referral fees. Under the CFA Curriculum, this policy is most likely:

Improper because employers must allow referral fees
Permitted as an employer procedure related to referral fees
Irrelevant because referral fees are a personal matter

Question 5 of 21

A member pays for client referrals and plans to explain the arrangement only after the client becomes aware of it later. This approach is most likely:

Acceptable because later awareness cures the problem
Acceptable if the client receives good service
Improper because disclosure should be made before the formal agreement

Question 6 of 21

A continuing percentage of fees paid for each referred client is most likely:

Not covered because it is not a one-time payment
Covered and should be disclosed
Covered only if the client earns a positive return

Question 7 of 21

A consultant hired to select an investment manager also receives a fee from the winning manager but tells no one. The consultant most likely violates the standard because the fee should be disclosed to:

The party relying on the consultant's recommendation
Only the winning manager
No one if the recommendation was objective

Question 8 of 21

A member tells a prospective client about a referral benefit but does not provide any estimated value. The member has most likely:

Complied because exact dollars are never needed
Violated the standard because the estimated dollar value should be disclosed
Complied if the benefit is small

Question 9 of 21

A member says, "The referral payment was small, so I did not disclose it." Under the CFA Curriculum, this is most likely:

Incorrect because the standard does not excuse small referral benefits
Correct because small payments cannot affect objectivity
Correct if the employer already knows

Question 10 of 21

The main reason referral fee disclosure is required is to let clients and employers most likely evaluate:

Only the firm's legal form
Possible partiality and the full cost of services
Whether the recommendation was profitable last year

Question 11 of 21

A bank employee receives an internal bonus for referring clients from the trust department to the brokerage department. This payment is most likely:

Outside the standard because it is inside one firm
Excluded if the client remains a bank client
A referral fee that must be disclosed

Question 12 of 21

A member receives a referral benefit and discloses it to clients but not to the employer. This is most likely:

Sufficient because clients are the only important audience
Insufficient because the employer is also an appropriate party for disclosure
Acceptable if the employer has no written policy

Question 13 of 21

A member recommends a service provider and receives a performance-based benefit if the referred account grows. The member should most likely:

Disclose the arrangement because performance-based benefits are covered
Wait to disclose until the benefit is actually paid
Treat it as outside the standard because payment depends on results

Question 14 of 21

Which statement about soft-dollar referral consideration is most accurate?

It is excluded because it is not cash
It must be disclosed because consideration includes soft dollars
It must be disclosed only if it is larger than a cash fee

Question 15 of 21

Which benefit most likely counts as referral fee consideration under the CFA Curriculum?

Only a cash check
Cash, soft dollars, and in-kind benefits
Only benefits linked to investment performance

Question 16 of 21

Which statement is most accurate under the CFA Curriculum?

Only benefits received must be disclosed
Only benefits paid must be disclosed
Benefits received from others and benefits paid to others for referrals must be disclosed

Question 17 of 21

A portfolio manager pays a former client a fee for sending a new prospective client to the firm. The manager must most likely disclose this arrangement to the new prospect:

Only after the prospect signs the service agreement
Before any formal agreement for services is entered into
Only if the prospect asks about marketing expenses

Question 18 of 21

A member refers a prospective client to another provider and receives no compensation, consideration, or benefit. Standard VI(C) most likely:

Applies because every referral must be disclosed
Does not create a referral fee disclosure issue on these facts
Applies only if the other provider is outside the firm

Question 19 of 21

A member receives research reports from another firm in return for referring accounts. The member should most likely treat the research reports as:

A noncash referral benefit requiring disclosure
Irrelevant because no cash changed hands
Acceptable without disclosure if the reports are useful

Question 20 of 21

A member fully discloses a referral arrangement before a prospect signs. The disclosure most likely should include:

Only the name of the referring party
Only a statement that some benefit may arise later
The nature of the benefit and its estimated dollar value

Question 21 of 21

A member discloses that a referral payment exists but omits whether it is a flat fee or a percentage of future fees. This disclosure is most likely:

Incomplete because the nature of the benefit must be disclosed
Sufficient because existence alone is enough
Unnecessary if the client trusts the member

Standard VI(B) - Referral Fees (Katas)

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First Principles Thinking: core concept

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First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept

First Principles Thinking: core concept