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CFAI Practice: M03 — Guidance for Standards I–VII

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CFAI Practice: M03 — Guidance for Standards I–VII

Total: 10 questions

Source: CFA Institute Practice Questions — Ethical and Professional Standards (2026)

Question 1

An analyst is a CFA charterholder working in a country where local securities law permits a practice that the CFA Institute Standards prohibit. The analyst should most appropriately:

  • A. follow local law because it governs the jurisdiction of practice
  • B. follow the stricter of the CFA Institute Standards or local law
  • C. follow the CFA Institute Standards only when working with international clients

Question 2

A sell-side analyst is invited by a corporate issuer to attend an all-expenses-paid trip to visit the company’s facilities overseas. Accepting this trip most likely violates:

  • A. Standard I(B) — Independence and Objectivity
  • B. Standard III(A) — Loyalty, Prudence, and Care
  • C. Standard VI(A) — Disclosure of Conflicts

Question 3

An analyst combines publicly available financial data, industry reports, and her own expert analysis to arrive at an investment conclusion. She has not used any material nonpublic information. Her research approach is best described as:

  • A. front-running
  • B. mosaic theory
  • C. insider trading

Question 4

A trader places large buy orders to artificially inflate a stock’s price, then sells at the inflated price. This activity most likely violates:

  • A. Standard II(A) — Material Nonpublic Information
  • B. Standard II(B) — Market Manipulation
  • C. Standard V(A) — Diligence and Reasonable Basis

Question 5

A portfolio manager’s primary fiduciary duty is owed to:

  • A. the employing firm’s shareholders
  • B. the clients whose assets she manages
  • C. the regulatory authorities overseeing the firm

Question 6

When distributing a new investment recommendation, a portfolio manager should most appropriately:

  • A. inform the firm’s largest clients before others
  • B. ensure fair dissemination to all clients simultaneously
  • C. prioritize institutional clients over retail clients

Question 7

An analyst learns from a client that the client is under investigation for money laundering. The analyst should most appropriately:

  • A. immediately disclose the information to law enforcement without notifying the client
  • B. maintain confidentiality of the client’s information unless legally required to disclose
  • C. publicly disclose the information to warn other market participants

Question 8

An analyst preparing to leave her current employer downloads the firm’s client list and proprietary research models to her personal device. This action most likely violates:

  • A. Standard I(A) — Knowledge of the Law
  • B. Standard IV(A) — Loyalty
  • C. Standard III(B) — Fair Dealing

Question 9

An analyst recommends a stock to clients based primarily on a tip from a colleague without conducting her own independent analysis. This most likely violates:

  • A. Standard V(A) — Diligence and Reasonable Basis
  • B. Standard II(A) — Material Nonpublic Information
  • C. Standard VI(B) — Priority of Transactions

Question 10

A portfolio manager purchases shares of a stock for her personal account immediately before executing a large buy order for the same stock on behalf of her clients. This action most likely violates:

  • A. Standard III(A) — Loyalty, Prudence, and Care
  • B. Standard VI(B) — Priority of Transactions
  • C. Standard II(B) — Market Manipulation

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