Free IAR Ethics & Professional Conduct Questions and Answers

Question 1

Under the fiduciary standard, what must an IAR prioritize above all else?

Accepted Answer

The client's best interest

Answer

Maximizing firm profits

Answer

Recommend products with the highest commissions

Answer

Meeting quarterly sales targets

Question 2

What is the first step an IAR should take if they identify a conflict of interest?

Accepted Answer

Disclose it to the client in writing

Answer

Ignore it if it's minor

Answer

Only inform their supervisor

Answer

Switch clients to avoid the conflict

Question 3

Which action violates the CFA Institute's Code of Ethics?

Accepted Answer

Plagiarizing investment research reports

Answer

Maintaining client confidentiality

Answer

Disclosing fees transparently

Answer

Reporting suspected unethical behavior

Question 4

An IAR learns a client is engaged in illegal activity. What should they do?

Accepted Answer

Report it to authorities if legally obligated

Answer

Continue managing their investments as usual

Answer

Use the information to trade ahead of the client

Answer

Blackmail the client for higher fees

Question 5

What is 'soft dollar' abuse under SEC rules?

Accepted Answer

Using client commissions to cover office rent or entertainment

Answer

Using client commissions to pay for research that benefits the client

Answer

Disclosing all commission arrangements

Answer

Avoiding commission-based accounts entirely

Question 6

An IAR's family member works at a company the IAR recommends to clients. This creates:

Accepted Answer

A conflict of interest requiring disclosure

Answer

No conflict if the recommendation is suitable

Answer

A violation only if the family member is an executive

Answer

An opportunity for referral fees

Question 7

When is it permissible to share confidential client information?

Accepted Answer

When required by law or with client authorization

Answer

When another client asks about it

Answer

When the advisor changes firms

Answer

When the information is publicly available

Question 8

What does 'suitability' require when recommending investments?

Accepted Answer

Matching investments to the client's profile and needs

Answer

Recommending the highest-return investment available

Answer

Only considering the client's age

Answer

Ignoring fees if the product is complex

Question 9

An IAR receives a gift from a client. How should they respond?

Accepted Answer

Report it to compliance per firm policy

Answer

Accept it if the client insists

Answer

Trade favors for the gift

Answer

Only accept cash gifts