Download AIF Exams 2024: Fiduciary Standards & Investment Management and more Exams Nursing in PDF only on Docsity!
Answers 2024
Standard of Care - Fiduciary - correct answers✅ 1-Principles and relationship based 2-Undivided duty of loyalty to client:
- Avoid or manage conflicts
- Greater transparency of conflicts 3-Duty of care of a prudent expert with utmost good faith:
- Prudent expert standard
- Advice must be suitable and in clients best interests Standard of Care - Fair Dealing - correct answers✅ 1- Rules and transaction-based
- Arms-length relationship 2 - Divided loyalty of agent between firm and customer:
- Conflicts may exist unmanaged and undisclosed 3 - Deal fairly, consistent with industry suitability standard:
- Suitability standard rapidly evolving Global Fiduciary Standards of Excellence - correct answers✅ the investment process FI360 designed to ensure investment decisions are prudently managed. Investment Fiduciary - correct answers✅ someone who is managing the assets of another person and stands in a special relationship of trust, confidence, and /or legal responsibility.
Answers 2024
Investment Stewards - correct answers✅ manage the overall investment decision-making process Investment Advisors - correct answers✅ professionals who provide comprehensive and continuous advice to Stewards. Investment Managers - correct answers✅ make securities transaction decisions and generally act with discretion. How many investment Stewards? - correct answers✅ more than five million men and women, responsible for managing more than 80% of the nation's liquid invested assets. Examples of Stewards - correct answers✅ individuals who serve as:
- trustees;
- committee members for endowments, foundations, and other institutional accounts;
- plan sponsors; or
- who occupy similar positions entrusted with managing assets for others.
- stand at the top of the fiduciary pecking order. How many Investment Advisors - correct answers✅ Approximately 317,000* investment advisors as of 2011
Answers 2024
What Fiduciary duty do Stewards and Advisors have? - correct answers✅ Stewards and Advisors have a fiduciary duty to demonstrate that the Investment Managers they use have been prudently selected and are monitored on an ongoing basis. What are Investment Stewards, Advisors, and Managers practices based on? - correct answers✅ Steward & Advisor practices are grounded in legislation, case law, and regulatory opinion letters Investment Manager practices are principle-driven T or F: Investment advisors and registered representatives (brokers) are both held to a fiduciary standard of care when dealing with their client. - correct answers✅ False: Investment advisors are held to a fiduciary standard of care with their client while brokers are held to a suitability standard. The advisor must always put the client's interest first; this involves a singular duty of loyalty to the investor. Brokers operating under the suitability standard may have divided loyalties. They are obligated to offer investments that are deemed "suitable" for the investor even if perhaps not in the investor's best interest. The broker also has a duty of loyalty to the broker-dealer firm the broker represents. T or F: The fiduciary responsibility of trusts and foundations are primarily framed by Federal legislation. - correct answers✅ False:
Answers 2024
The fiduciary responsibilities of trusts and foundations are primarily framed by state legislation. In most cases UPIA applies to trusts and UPMIFA (or UMIFA) applies to foundations. Corporate retirement and Taft-Hartley plans are generally governed by Federal legislation - ERISA. T or F: An investment advisor assumes fiduciary responsibility when they take discretion. - correct answers✅ False: An investment advisor is generally a fiduciary by virtue of rendering comprehensive and continuous investment advice. Taking discretion would make the advisor a fiduciary, however, an advisor without discretion would still be a fiduciary by virtue of having a relationship of trust based upon ongoing advisory services provided. Objectives of the Practices p33 - correct answers✅ • Define prudent processes for investment fiduciaries that are comprehensive, but not cumbersome.
- Provide a checklist approach to guide any investment fiduciary in the pursuit of fiduciary excellence.
- Enable any organization to assess its fiduciary activities to determine conformity to Global Fiduciary Standards of Excellence. Name the 4 Steps in the Investment Management Process (Fiduciary Quality Management System)
Answers 2024
What is Fiduciary Liability determined by - correct answers✅ Fiduciary liability is not determined by investment performance, but rather on whether a prudent investment process is followed. Legislation of Foundations, Endowments and Private trusts and Corporate Retirement Plans - correct answers✅ Foundations, Endowments and Private trusts are governed by state legislation. In the case of private trusts, the applicable state legislation in most states is the Uniform Prudent Investor Act (UPIA) and therefore the State Attorney General has oversight responsibilities. The State Attorney General also has oversight for public pension plans, foundations, and endowments. The DOL, IRS and PGBC provide oversight to corporate retirement plans while the DOL and IRS provide oversight to Taft-Hartley plans. ERISA - correct answers✅ Employee Retirement Income Security Act Federal legislation that impacts corporate qualified retirement plans, both defined benefit and defined contribution plans UPIA - correct answers✅ Uniform Prudent Investor Act State-enacted legislation that impacts private trusts
Answers 2024
UPMIFA - correct answers✅ Uniform Prudent Management of Institutional Funds Act State-enacted legislation that it impacts foundations, endowments and government sponsored charitable institutions. UMPERSA - correct answers✅ Uniform Management of Public Employee Retirement Systems Act State-enacted legislation that addresses state, county, and municipal retirement plans. UMPERSA has administrative and record-keeping provisions that are similar to ERISA, with investment fiduciary responsibilities closely paralleling those of UPIA. It has only been adopted by Maryland and Wyoming. IIA - correct answers✅ Investment Advisors Act of 1940 Who has the most comprehensive role in the investment process?
- correct answers✅ Stewards have the most comprehensive role in the investment process: to manage the process, without which the other components of the investment plan cannot be defined, implemented, or evaluated. Legislation, case law, and regulatory opinion letters dealing with fiduciary status further reinforce this important concept.
Answers 2024
Similarly, when an advisor hires an investment manager, the advisor shifts liability for the securities buy and sell decisions to the manager. The advisor does not, however, escape the obligations to do appropriate due diligence in the selection and monitoring of the manager. Examples of Fiduciary Breaches p16-18 - correct answers✅ -failure to negotiate rebates from the plans; -selecting more expensive share classes for the Section 401(k) plans when less expensive share classes were available; -removing one fund and replacing it with another in violation of the IPS's procedural guidelines, -using revenue-sharing to subsidize other corporate services, including payroll and recordkeeping for ABB's health and defined benefit plans. -failure to disclose information about the fees and costs to participants, -failure to monitor revenue-sharing and disclose information regarding those arrangements, -plan participant whose investment directions were not followed by the plan administrator could pursue an individual fiduciary breach claim. Case Law Takeaways p17-18 - correct answers✅ • District and appellate court decisions often conflict
- Individual cases do not always provide bright-line guidance
Answers 2024
- ERISA issues recently reviewed by the courts:
- Excessive fees
- Disclosure of revenue-sharing
- Float income as a plan asset
- Fiduciary selection of investment options: ◦ Stable value funds ◦ Company stock drops ◦ Brokerage platforms as designated investment options ◦ More or Fewer Investment Options
- Establish prudent processes to avoid fiduciary breaches Global Fiduciary Precepts p25-26 - correct answers✅ 1. Know standards, laws, and trust provisions
- Diversify assets to specific risk/return profile of client
- Prepare investment policy statement***
- Use "prudent experts" and document due diligence
- Control and account for investment expenses
- Monitor the activities of "prudent experts"
- Avoid conflicts of interest and prohibited transactions *** most critical according to AIF
Answers 2024
Systems. The investment management process is, when applied properly, a quality management system. Explain the 4th Step in the Fiduciary EMS - correct answers✅ the fourth step is to monitor the activities of selected investment managers, as well as other investment-related service vendors. It also involves conducting periodic assessments of the organization's own fiduciary activities. Explain the 3rd Step in the Fiduciary EMS - correct answers✅ The third step is to implement the investment policy statement with appropriate money managers, funds, or other investment vehicles and to establish the custodial and brokerage services. Explain the 2nd Step in the Fiduciary EMS - correct answers✅ The second step is to design the optimal asset allocation strategy and prepare the investment policy statement, known asthe Formalize step. Explain the 1st Step in the Fiduciary EMS - correct answers✅ The first step of the Four-Step Fiduciary QMS is to organize how investment decisions are going to be managed. Objectives of the Practices
Answers 2024
p33 - correct answers✅ • Define prudent processes for investment fiduciaries that are comprehensive, but not cumbersome.
- Provide a checklist approach to guide any investment fiduciary in the pursuit of fiduciary excellence.
- Enable any organization to assess its fiduciary activities to determine conformity to Global Fiduciary Standards of Excellence. What is an Assessment? - correct answers✅ Assessment is:
- systematic, independent, and documented process
- used for obtaining assessment evidence and evaluating it objectively
- to determine the extent to which assessment criteria are fulfilled Describe Level 1 Assessment - correct answers✅ Level 1 is a self- assessment of fiduciary excellence or SAFE. This is analogous to an internal audit in accounting. Please refer to one of the SAFE booklets in your materials. You will note that the SAFE asks a series of questions that are intended to be answered yes or no. These represent a fiduciary shortfall.
Answers 2024
The CAFE requires an independent analyst and additional layers of data gathering and evaluation than the first two levels of assessment. What is CEFEX - correct answers✅ CEFEX is an international certification organization for Investment Advisors, Investment Stewards, Investment Managers, Recordkeepers, and Third Party Administrators. fi360 is the majority owner of CEFEX. CEFEX Certification provides independent recognition of a fiduciary's or service provider's conformity to all applicable fiduciary practices and criteria. What is the AIFA program - correct answers✅ The AIFA program provides the requisite knowledge to conduct comprehensive assessments of conformity to the Global Fiduciary Standards of Excellence. The AIFA designation is required of all analysts that conduct assessments leading to a CEFEX certification.
