CFAI Practice: M01 — Ethics and Trust in the Investment Profession

Total: 12 questions

Source: CFA Institute Practice Questions — Ethical and Professional Standards (Volume 10)


Question 1

A profession’s standards of conduct serve as benchmarks for the minimally acceptable behavior of its members. Standards of conduct most accurately describe:

  • A. ethical principles
  • B. codes of ethics
  • C. standards of conduct

Question 2

Which of the following best describes characteristics of a profession? A profession requires:

  • A. specialized knowledge, accountability, and high pay
  • B. specialized knowledge, commitment to serve clients and society, and a shared code of conduct
  • C. formal education, government licensing, and a shared code of conduct

Question 3

When a company’s employees engage in unethical behavior, trust in the firm erodes. As a result, the firm most likely experiences:

  • A. higher revenues and higher expenses
  • B. lower revenues and lower expenses
  • C. lower revenues and higher expenses

Question 4

High ethical standards in the investment profession are primarily upheld and distinguished by:

  • A. government regulators
  • B. individual firms
  • C. professional bodies

Question 5

A fiduciary duty — the obligation to act in the best interest of clients — is most likely upheld by members of a:

  • A. trade association
  • B. profession
  • C. regulatory body

Question 6

Which of the following is an internal trait that most likely leads to poor ethical decision making?

  • A. Overconfidence
  • B. peer pressure
  • C. loyalty to employer

Question 7

The influence of situational factors on ethical decision making is minimized when an organization has:

  • A. strong compliance programs
  • B. a charismatic leader
  • C. flexible ethical standards

Question 8

A potential shortcoming of a compliance-based approach to ethical decision making is that decision makers may:

  • A. ignore legal requirements
  • B. oversimplify decision making
  • C. adopt more stringent ethical standards

Question 9

To maintain public trust, the investment profession is most likely interdependent with:

  • A. regulators
  • B. media organizations
  • C. academic institutions

Question 10

An activity that is legal but which CFA Institute would most likely consider unethical is:

  • A. short selling a stock
  • B. trading on material nonpublic information (MNPI) in a jurisdiction where it is not prohibited
  • C. charging performance-based fees

Question 11

An ethical decision-making framework is most likely designed to:

  • A. guarantee ethical outcomes in all situations
  • B. replace professional judgment
  • C. help avoid unanticipated consequences

Question 12

When faced with an ethical dilemma at work, the CFA Institute ethical decision-making framework recommends that you first raise the issue with:

  • A. an external regulator
  • B. a legal advisor
  • C. a senior individual in the firm