Practice quiz · by a Quizcard user

CFA Level I: Ethics and Professional Standards — quiz

20 multiple-choice questions covering Code of Ethics, Applicability of the Code, Knowledge of the Law, Independence and Objectivity, Misrepresentation. One answer each; you get a score at the end and the explanation for every question. No account needed.

Updated 2026-11-03. Keys 1–4 pick an answer, Enter moves on. Redo it any time, in order or shuffled.

The questions

Answers and explanations are shown after you finish.

1. Code of Ethics

   Which statement best reflects a core requirement of the CFA Institute Code of Ethics?

   • Maximize assets under management for the employer at all times
   • Act independently of client needs to preserve objectivity
   • Comply with the Code only when local law explicitly requires it
   • Place the integrity of the investment profession and client interests above one's own personal interests
2. Applicability of the Code

   A candidate works in a country where securities law is less restrictive than the CFA Institute Code and Standards. What is the candidate required to do?

   • Follow local law because it is legally binding
   • The Code does not apply until the charter is awarded
   • Follow the stricter of the Code/Standards or local law
   • Follow whichever standard the employer prefers
3. Knowledge of the Law

   An analyst discovers that a colleague is actively violating securities law. Under Standard I(A), what is the minimum action the analyst must take?

   • Confront the colleague and demand they stop
   • Continue working but keep a private record of concerns
   • Stop participating in the activity and seek to disassociate from it
   • Immediately report the colleague to regulators
4. Independence and Objectivity

   A sell-side analyst accepts an all-expenses-paid trip from an issuer to tour its facilities before publishing a research report. This most directly raises concerns under which standard?

   • Standard I(A) Knowledge of the Law
   • Standard I(B) Independence and Objectivity
   • Standard I(C) Misrepresentation
   • Standard IV(B) Additional Compensation Arrangements
5. Misrepresentation

   An analyst who contributed to a team research report tells a client she alone produced the entire analysis. Which standard has she violated?

   • Standard VII(B) Reference to CFA Designation
   • Standard V(B) Communication with Clients
   • Standard I(D) Misconduct
   • Standard I(C) Misrepresentation
6. Misconduct

   A charterholder is convicted of personal income tax fraud unrelated to her job duties. Does this implicate the Code and Standards?

   • No, Standard I(D) only applies to conduct during working hours
   • No, because the conduct is unrelated to her professional duties
   • Yes, under Standard I(D) because it reflects adversely on her honesty and integrity
   • Only if her employer is notified by regulators
7. Material Nonpublic Information

   An analyst combines publicly available financial statements with nonmaterial, nonpublic insights from industry contacts to form an investment opinion, then trades on that opinion. Is this a violation of Standard II(A)?

   • No, this is permitted under the mosaic theory
   • No, but only if the information came from a company insider
   • Yes, because any nonpublic information triggers the prohibition
   • Yes, unless the trade is reported to compliance first
8. Market Manipulation

   Which of the following is an example of transaction-based market manipulation prohibited under Standard II(B)?

   • Publishing a buy recommendation based on public filings
   • Quoting a company's earnings guidance without independent verification
   • Executing wash trades to artificially inflate trading volume
   • Spreading a false rumor that a merger is imminent
9. Loyalty, Prudence, and Care

   Under Standard III(A), when the interests of the client, the employer, and the member conflict, what is the correct priority order?

   • Client, then employer, then member
   • Employer, then client, then member
   • Member, then employer, then client
   • Employer and client should be weighted equally first
10. Fair Dealing

    A firm sends a stock downgrade to its premier wealth-management clients first and releases it to all other clients several hours later. This practice most likely violates which standard?

    • Standard VI(A) Disclosure of Conflicts
    • Standard III(B) Fair Dealing
    • Standard I(C) Misrepresentation
    • No violation, since premier clients pay higher fees
11. Suitability

    A portfolio manager with a mandate restricted to large-cap growth stocks purchases a small-cap value stock because she believes it will outperform. This action most likely violates which standard?

    • Standard III(C) Suitability
    • Standard III(A) Loyalty, Prudence, and Care
    • No violation, since diversification benefits the client
    • Standard V(A) Diligence and Reasonable Basis
12. Performance Presentation

    According to Standard III(D), what is a member's core obligation when presenting a track record to prospective clients?

    • Make reasonable efforts to ensure performance information is fair, accurate, and complete
    • Present only since-inception returns to avoid short-term volatility
    • Achieve full GIPS compliance, which is mandatory under the Code
    • Present only returns that have been independently audited
13. Preservation of Confidentiality

    A client tells her investment adviser, in confidence, that she plans to defraud a business partner using funds from her account. Under Standard III(E), may the adviser disclose this information?

    • Yes, disclosure concerning illegal activity by the client is a recognized exception
    • Only if a court subpoenas the adviser
    • Only after formally terminating the client relationship
    • No, client confidentiality is absolute under the Code
14. Loyalty to Employer

    While still employed, an analyst secretly copies her firm's proprietary client contact list, intending to use it at a new employer she plans to join. Is this a violation?

    • No, because she has not yet resigned from the firm
    • No, because client lists are not considered confidential
    • Yes, Standard IV(A) Loyalty, due to misappropriation of confidential employer information
    • Yes, but only Standard I(B) Independence and Objectivity applies
15. Additional Compensation Arrangements

    A broker offers a portfolio manager a personal bonus for directing client trades through the broker's desk, without informing the manager's employer. What must occur for this to be permissible under Standard IV(B)?

    • Nothing, as long as the bonus amount is modest
    • Nothing, since the manager did not solicit the arrangement
    • Only disclosure to the client is required
    • Written consent must be obtained from all relevant parties, including the employer
16. Responsibilities of Supervisors

    A supervisor delegates compliance monitoring to a junior staff member but never checks whether it is being carried out, and a violation subsequently occurs. Under Standard IV(C), is the supervisor likely responsible?

    • No, responsibility rests solely with the compliance department
    • No, delegation fully transfers responsibility to the junior staff member
    • Only if the supervisor personally profited from the violation
    • Yes, because the supervisor failed to make reasonable efforts to detect and prevent violations
17. Diligence and Reasonable Basis

    A member issues a buy recommendation based solely on a company's press release, without performing any independent verification or analysis. Which standard is most directly violated?

    • Standard III(C) Suitability
    • Standard V(C) Record Retention
    • Standard V(A) Diligence and Reasonable Basis
    • Standard I(C) Misrepresentation
18. Record Retention

    Absent stricter local regulation, what minimum retention period does CFA Institute recommend for records supporting investment analyses and recommendations under Standard V(C)?

    • 7 years
    • 3 years
    • 10 years
    • 5 years
19. Priority of Transactions

    A member's spouse holds a brokerage account that is used to trade ahead of a large client block order, based on the member's advance knowledge of the order. Is this a violation?

    • Yes, Standard VI(B) Priority of Transactions is violated
    • No, unless the spouse's profit exceeds a specific dollar threshold
    • No, because accounts held by family members are exempt from this standard
    • Yes, but only Standard I(B) Independence and Objectivity applies
20. GIPS Basics

    Under the Global Investment Performance Standards (GIPS), who is permitted to claim compliance?

    • Both individual portfolio managers and firms
    • Only investment management firms, as a whole
    • Any individual CFA charterholder
    • Only regulators overseeing the firm