FREE CPM Ethics & Professional Standards Questions and Answers

Question 1

Why are ethics essential in portfolio management?

Accepted Answer

To maintain trust and market integrity

Answer

To increase trade volume

Answer

To boost commissions

Answer

To avoid reporting requirements

Question 2

Which action violates the duty of loyalty to a client?

Accepted Answer

Executing personal trades ahead of client orders

Answer

Disclosing risks to clients

Answer

Rebalancing client portfolios

Answer

Providing investment advice

Question 3

What does the CFA Institute’s Code of Ethics emphasize for financial professionals?

Accepted Answer

Maintaining integrity and professional competence

Answer

Maximizing short-term profits

Answer

Reducing compliance documentation

Answer

Prioritizing firm commissions

Question 4

Which of the following is a key principle of professional standards?

Accepted Answer

Fair dealing with all clients

Answer

Prioritizing influential clients

Answer

Disregarding small accounts

Answer

Selective disclosure of opportunities

Question 5

Why must portfolio managers avoid conflicts of interest?

Accepted Answer

To protect client interests and preserve objectivity

Answer

To improve marketing strategies

Answer

To increase firm profits

Answer

To defer audits

Question 6

Which is considered unethical behavior for a portfolio manager?

Accepted Answer

Accepting undisclosed third-party compensation

Answer

Rejecting client gifts

Answer

Documenting investment advice

Answer

Using formal client agreements

Question 7

Which document should clearly outline client rights and manager responsibilities?

Accepted Answer

Investment management agreement

Answer

Company newsletter

Answer

Holiday card

Answer

Personal notes

Question 8

What should a portfolio manager do if personal interests conflict with client interests?

Accepted Answer

Disclose the conflict to the client

Answer

Conceal the conflict

Answer

Ignore the situation

Answer

Prioritize personal gain

Question 9

Why is confidentiality important in portfolio management?

Accepted Answer

To protect sensitive client information

Answer

To gain trading advantages

Answer

To advertise client portfolios

Answer

To boost social recognition