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Ethical and Professional Standards Flashcards

7 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 7 Ethical and Professional Standards flashcards as text

  1. Under the Global Investment Performance Standards (GIPS), composite construction requires that:

    Answer: All discretionary, fee-paying portfolios with similar mandates be included

    GIPS requires that all actual, fee-paying, discretionary portfolios managed to the same strategy be included in the relevant composite.

  2. A firm claiming GIPS compliance must present at least how many years of compliant performance history (or since inception if shorter)?

    Answer: 5 years

    GIPS requires firms to present a minimum of five years of compliant performance history, building to ten years over time.

  3. Which CFA Institute Code of Ethics principle is MOST directly violated when a member misrepresents their educational credentials on a marketing brochure?

    Answer: Act with integrity, competence, diligence, and respect

    Misrepresenting credentials violates the foundational requirement to act with integrity and honesty in all professional activities.

  4. Standard VII(B) – Reference to CFA Institute, Designation, and Program prohibits which of the following?

    Answer: Using 'CFA' as a noun (e.g., 'I am a CFA')

    CFA must be used as an adjective, not a noun; correct usage is 'CFA charterholder' or 'CFA candidate,' never 'a CFA.'

  5. An investment firm's compliance policy explicitly prohibits a practice that is legal in the local jurisdiction but violates the CFA Standards. A member working there must:

    Answer: Follow the stricter firm policy that aligns with CFA Standards

    When local law, firm policy, and CFA Standards all differ, members must follow the most restrictive applicable rule.

  6. Selective disclosure — sharing material nonpublic information with select analysts before a public announcement — is BEST handled by a CFA member by:

    Answer: Making reasonable efforts to achieve public disclosure before acting

    A member who receives material nonpublic information through selective disclosure must seek public dissemination before acting on it.

  7. Under the duty to report violations (Standard I(A)), a CFA member who discovers a colleague front-running client orders should FIRST:

    Answer: Attempt to stop the behavior and report it through proper internal channels

    Standard I(A) requires members to report violations through appropriate internal compliance channels and dissociate from the misconduct.