CFA Ethical and Professional Standards 2

Question 1

Under Standard I(B) – Independence and Objectivity, which action BEST protects a CFA charterholder from compromising their independence?

Accepted Answer

Declining gifts that could reasonably be expected to compromise judgment

Answer

Standard I(B) requires declining gifts that could reasonably influence judgment, not merely disclosing them.

Question 2

A portfolio manager receives research reports from a broker who also executes trades. Under soft-dollar standards, this arrangement is acceptable if:

Accepted Answer

The research directly benefits clients whose commissions funded it

Answer

Soft-dollar arrangements are permissible when research provides direct benefit to the clients whose commissions funded the service.

Question 3

Standard II(A) – Material Nonpublic Information prohibits trading on inside information. A 'mosaic theory' defense is valid when:

Accepted Answer

The analyst combines multiple pieces of public information to form a conclusion

Answer

Mosaic theory allows analysts to reach investment conclusions by combining multiple pieces of publicly available information.

Question 4

Which of the following scenarios is MOST likely a violation of Standard II(B) – Market Manipulation?

Accepted Answer

Publishing a research report with a bullish outlook to inflate a position

Answer

Issuing misleading research to artificially inflate prices for personal gain constitutes market manipulation under Standard II(B).

Question 5

Standard III(A) – Loyalty, Prudence, and Care requires members to act in clients' best interests. If a member's employer and client interests conflict, the member must:

Accepted Answer

Prioritize client interests over those of the employer

Answer

Standard III(A) places client interests above employer interests when conflicts arise.

CFA Practice Test

CFA Practice Test

CFA Ethical and Professional Standards 2