CFA Ethics and Professional Standards 1

Question 1

According to the CFA Institute Code of Ethics, members must act with integrity, competence, diligence, respect, and in an ethical manner with which of the following?

Accepted Answer

The public, clients, prospective clients, employers, employees, colleagues, and other participants in the global capital markets

Answer

Only their clients

Answer

Only their employer and clients

Answer

Only regulators and clients

Question 2

Under Standard I(C) – Misrepresentation, which of the following is LEAST likely a violation?

Accepted Answer

Citing a firm's historical track record accurately

Answer

Guaranteeing a specific investment return

Answer

Plagiarizing research from another analyst

Answer

Omitting material facts that make a statement misleading

Question 3

Standard II(A) – Material Nonpublic Information prohibits trading on information that is material and nonpublic. Information is considered material if:

Accepted Answer

It would significantly affect the price of a security or a reasonable investor would want to know it before investing

Answer

It was obtained from a corporate insider only

Answer

It relates exclusively to earnings announcements

Answer

It has been disclosed to at least one analyst

Question 4

Which of the following best describes the 'mosaic theory' as it relates to Standard II(A)?

Accepted Answer

Combining nonmaterial nonpublic information with public information to reach a conclusion

Answer

Combining material nonpublic information with public information to make a trade

Answer

Using only public information to conduct research

Answer

Using insider tips alongside public data

Question 5

Under Standard IV(A) – Loyalty, if an employee plans to leave and start a competing firm, which action is PERMISSIBLE before resigning?

Accepted Answer

Making arrangements with a new employer while keeping current responsibilities

Answer

Soliciting current clients for the new firm

Answer

Copying confidential client lists from the employer

Answer

Using employer resources to prepare for the new business

Question 6

A CFA charterholder who discovers their employer is engaged in fraudulent activity should FIRST:

Accepted Answer

Report the activity to the appropriate supervisor or compliance department

Answer

Immediately report the employer to regulators

Answer

Resign immediately without taking any action

Answer

Publicly disclose the fraud to the media