Ethics and Professional Standards Flashcards
6 cards from real CFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Ethics and Professional Standards flashcards as text
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?
Answer: The public, clients, prospective clients, employers, employees, colleagues, and other participants in the global capital markets
The CFA Institute Code of Ethics requires members to act ethically with the public, clients, prospective clients, employers, employees, colleagues, and all capital market participants.
Under Standard I(C) – Misrepresentation, which of the following is LEAST likely a violation?
Answer: Citing a firm's historical track record accurately
Accurately citing historical performance is not a misrepresentation; guaranteeing returns, plagiarism, and misleading omissions all violate Standard I(C).
Standard II(A) – Material Nonpublic Information prohibits trading on information that is material and nonpublic. Information is considered material if:
Answer: It would significantly affect the price of a security or a reasonable investor would want to know it before investing
Material information is defined as information that would affect a security's price or that a reasonable investor would want to know before making an investment decision.
Which of the following best describes the 'mosaic theory' as it relates to Standard II(A)?
Answer: Combining nonmaterial nonpublic information with public information to reach a conclusion
Mosaic theory allows analysts to legally combine nonmaterial nonpublic information with public information to form investment conclusions.
Under Standard IV(A) – Loyalty, if an employee plans to leave and start a competing firm, which action is PERMISSIBLE before resigning?
Answer: Making arrangements with a new employer while keeping current responsibilities
Arranging future employment with a new employer is permissible, provided the member continues to fulfill current job duties and does not use employer resources improperly.
A CFA charterholder who discovers their employer is engaged in fraudulent activity should FIRST:
Answer: Report the activity to the appropriate supervisor or compliance department
Members should first attempt to resolve the issue internally by reporting it to their supervisor or compliance department before escalating externally.