CIMA - Certified Investment Management Analyst Ethics and Professional Responsibility Questions and Answers

Question 1

A CIMA professional is an advisor at a firm that offers both proprietary and third-party mutual funds.
The firm's proprietary funds generate higher fees for the firm and a larger commission for the advisor.
When advising a client, the CIMA professional identifies a third-party fund that is more suitable for the client's objectives, has a lower expense ratio, and a stronger performance history than a similar proprietary fund.
To comply with the Code of Professional Responsibility, what is the advisor's primary obligation?

Accepted Answer

Present both funds to the client, fully disclose the conflict of interest including the differential compensation, and act in the client's best interest.

Answer

Recommend the proprietary fund because the increased revenue is beneficial for the long-term stability of the firm, which indirectly benefits all clients.

Answer

Recommend the third-party fund but only after receiving written permission from a supervisor to recommend a non-proprietary product.

Answer

Present both funds equally without mentioning the compensation difference to avoid biasing the client's decision.

Question 2

A CIMA professional is approached by a journalist to comment on a former client's investment portfolio and financial situation. The client has since moved their assets to another firm and the professional relationship has ended. Under which of the following circumstances is the CIMA professional permitted to disclose this confidential information?

Accepted Answer

When required to do so by a court of law or with the former client's explicit consent.

Answer

If the information is presented anonymously without mentioning the client's name.

Answer

Because the professional relationship has been terminated for over a year.

Answer

If the journalist is a trusted contact who promises to keep the source confidential.

Question 3

A client with a low risk tolerance insists on investing a significant portion of their retirement account in a single, highly speculative cryptocurrency, contrary to the CIMA professional's strong advice and detailed risk analysis. What is the MOST appropriate action for the CIMA professional to take?

Accepted Answer

Execute the trade as instructed by the client, but document the unsuitability of the investment, the advice given, and the client's decision to proceed against that advice.

Answer

Refuse to make the trade and terminate the client relationship immediately.

Answer

Execute the trade but hedge the position with derivatives without the client's knowledge to protect them.

Answer

Inform the client that such a trade cannot be placed without a signed waiver from the firm's compliance department.

Question 4

Which of the following actions constitutes a direct violation of the CIMA professional's duty of integrity?

Accepted Answer

Guaranteeing a client that a specific mutual fund will achieve a 10% annual return.

Answer

Failing to stay current with changes in tax law that could affect investment recommendations.

Answer

Charging a performance-based fee that is higher than the industry average.

Answer

Disclosing a potential conflict of interest to a client regarding a recommended product.

Question 5

A CIMA professional, while employed by an investment firm, develops a complex financial modeling software program on their own time, using their personal computer and software licenses. The program is not directly related to their current job duties but could be highly valuable to the firm. According to the Code of Professional Responsibility, what is the professional's obligation?

Accepted Answer

The professional should disclose the software to their employer to manage any potential conflicts of interest or duties owed to the firm.

Answer

The professional has no obligation to their employer as the software was created on personal time and resources.

Answer

The professional can immediately sell the software to a competing firm without disclosure.

Answer

The professional must transfer all intellectual property rights to their employer for no compensation.

Question 6

A CIMA professional managing a pension fund is offered two tickets to the Super Bowl by a brokerage firm that currently handles a small portion of the fund's trades. The brokerage firm has expressed a strong desire to increase its business with the pension fund. According to the Code of Professional Responsibility, what is the BEST course of action?

Accepted Answer

Decline the gift because its value is substantial enough to create the appearance of, or actually compromise, the professional's objectivity.

Answer

Accept the tickets, as they are a gift to the professional personally and not to the fund.

Answer

Accept the tickets and disclose their receipt in the fund's next annual report.

Answer

Accept the tickets but allocate more trades to a different brokerage firm to demonstrate impartiality.