Discuss CFA Institute CFA-Level-I Exam Topic 1 Question 29

Andy Pilling is a bond trading specialist who recently started a special fund, the "Structured Bond Fund." The strategy behind this fund is quite complex, involving a mix of highly speculative, high-yield bonds and various tax-free municipal bonds for some stability. Andy has a strong view that the economy will remain vibrant and bullish over the next two years and hence, is not worried about the risky bonds. Assuming a falling rate scenario in this case allows the fund to project an expected return 130 basis points above the S&P 500 return. In his special report, Pilling does not disclose such assumptions nor does he reveal any details about the bond strategy. He does analyze the state of the economy and the future outlook in the report. Based on his reputation and his association with some big name academics, Pilling is able to obtain capital of close to 75 million dollars on this fund alone. Andy has:

Anot violated any standards in the AIMR Code of Ethics.

Bviolated Standard IV (B.6) - Prohibition Against Misrepresentation.

Cviolated Standard IV (A.2) - Research Reports - by not revealing the assumptions and details about the strategy.

Dviolated Standard IV (B.1) - Fiduciary Duties - by not disclosing the nature of the strategy.

Suggested Answer: C

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20 comments · newest first

Teri 1 month ago

Definitely a violation. Investors deserve to know the risks involved.

Eric 1 month ago

But confidence doesn’t excuse lack of disclosure. It’s risky!

Bernadine 2 months ago

I feel he’s fine. He’s just confident in his approach.

Jacob 2 months ago

I lean towards option D. Not disclosing strategy is a breach of duty.

Leanna 2 months ago

Agreed! Transparency is key in finance.

Nilsa 2 months ago

I think he violated Standard IV (A.2). No details on strategy is misleading.

Lashunda 2 months ago

Not sure about this fund, seems like a lot of speculation involved.

Flo 2 months ago

I think he’s fine, reputation matters in this game.

Camellia 3 months ago

Surprised he got that much capital without full transparency.

Latanya 3 months ago

I agree, not disclosing assumptions is a big red flag!

Billye 3 months ago

Sounds like a risky move with those high-yield bonds.

Kate 3 months ago

I think he’s fine, reputation matters in this game.

Ernestine 3 months ago

Not sure if he's violated any standards, but it feels sketchy.

Marya 3 months ago

Surprised he got 75 million without full transparency!

Jutta 5 months ago

I agree, he should definitely disclose those assumptions.

Tina 5 months ago

Sounds like a risky move with those high-yield bonds!

Van 6 months ago

I’m a bit confused about the standards, but I think if he’s not disclosing key details, it could be a violation of ethics. Standard IV (A.2) seems relevant here.

Glory 6 months ago

This situation reminds me of a practice question where a fund manager misrepresented their strategy. I think that could connect to Standard IV (B.6) about misrepresentation.

Shawnda 6 months ago

I'm not entirely sure, but I feel like the lack of detail about the strategy could also relate to fiduciary duties. Maybe he violated Standard IV (B.1)?

Nobuko 6 months ago

I remember discussing the importance of transparency in research reports, so I think he might have violated Standard IV (A.2) by not disclosing his assumptions.

CFA Institute CFA-Level-I Exam - Topic 1 Question 29 Discussion