CFA® Level I Exam 2026 Latest Comprehensive Study
Guide with Practice Questions Financial Analysis Review,
Detailed Explanations, Verified Answers, Success Workbook
Key 2026 Update: The CFA Level I curriculum has no substantive changes from
2025 to 2026. All 93 learning modules remain unchanged.
• Question Format: Multiple Choice
• Answer Key: The correct answer is bolded and highlighted in each
rationale.
• Tip: Cover the rationale and try to answer each question independently first.
SECTION 1: ETHICAL AND PROFESSIONAL STANDARDS (Questions 1–
12)
1. According to the CFA Institute Code of Ethics and Standards of
Professional Conduct, which of the following is the PRIMARY duty of a CFA
charterholder?
A) To maximize returns for all clients regardless of risk tolerance
B) To act with integrity, competence, diligence, respect, and in an ethical
manner with the public, clients, prospective clients, employers, employees,
colleagues in the investment profession, and other participants in the global
capital markets
C) To prioritize the interests of the employer over those of the client
D) To maintain confidentiality of all client information under all circumstances
Rationale:
• A is incorrect: Maximizing returns without regard to risk tolerance violates
the duty to act in the client's best interest and the suitability standard.
• B is correct: The Code of Ethics establishes the fundamental principles that
all CFA Institute members and candidates must follow. The primary duty is
, to act with integrity, competence, diligence, respect, and in an ethical
manner with all stakeholders.
• C is incorrect: Under Standard III(A) Loyalty, Prudence, and Care, the
client's interests must always take precedence over the employer's interests.
• D is incorrect: While confidentiality is important (Standard III(E)), it is not
absolute. There are exceptions, such as when disclosure is required by law or
when the client provides permission.
2. A CFA candidate is preparing a research report on a publicly traded
company. The candidate's spouse owns 500 shares of the company's stock.
Under the CFA Institute Standards of Professional Conduct, what is the
candidate's MOST appropriate course of action?
A) Do nothing; the holding is immaterial and does not affect the research
B) Disclose the spouse's ownership in the research report and, if possible, have
the report reviewed by a compliance officer
C) Sell the shares before publishing the report
D) Ask the spouse to transfer the shares to a blind trust
Rationale:
• A is incorrect: Even if the holding is small, failing to disclose a potential
conflict of interest violates Standard VI(A) Disclosure of Conflicts.
• B is correct: Under Standard VI(A) Disclosure of Conflicts, members and
candidates must disclose all matters that could reasonably be expected to
impair their objectivity. The spouse's ownership creates a potential conflict
that must be disclosed. Having the report reviewed by compliance is an
additional prudent step.
• C is incorrect: While selling the shares would eliminate the conflict, it is
not required—disclosure is sufficient. Selling may also create tax
implications or transaction costs.
• D is incorrect: Transferring to a blind trust may address the conflict but is
not the most appropriate immediate action. Disclosure is the primary
requirement.
,3. A portfolio manager receives a material, non-public tip from a company
insider about an upcoming merger. The manager does not trade on the
information but shares it with a colleague who trades on it. Under the CFA
Institute Standards, which of the following statements is MOST accurate?
A) The manager is not in violation because they did not trade personally
B) The manager is in violation of Standard II(A) Material Nonpublic
Information
C) The manager is only in violation if the insider was a client
D) The manager is in violation only if they profited from the trade
Rationale:
• A is incorrect: Standard II(A) prohibits not only trading on material
nonpublic information but also communicating it to others who may trade
on it.
• B is correct: Under Standard II(A) Material Nonpublic Information,
members and candidates who possess material nonpublic information must
not act or cause others to act on it. Sharing the tip with a colleague who
trades on it constitutes a violation, even if the manager did not trade
personally.
• C is incorrect: The source of the information does not determine the
violation; it is the use and communication of material nonpublic information
that is prohibited.
• D is incorrect: The standard prohibits both trading and tipping, regardless
of whether the tipper profits.
4. A CFA candidate is offered a gift from a client. The gift is a weekend at a
luxury resort valued at $3,000. The candidate's firm has a policy allowing gifts
up to $500. What should the candidate do?
A) Accept the gift since it is from a client
B) Decline the gift as it exceeds the firm's gift policy
C) Accept the gift but disclose it to the client's supervisor
D) Accept the gift and donate the equivalent value to charity
Rationale:
, • A is incorrect: Accepting the gift without regard to firm policy violates
Standard IV(A) Loyalty to Employer.
• B is correct: Under Standard IV(A) Loyalty to Employer, members and
candidates must comply with reasonable employer policies, including gift
policies. The gift exceeds the firm's $500 limit, so it must be declined.
• C is incorrect: Disclosing to the client's supervisor does not override the
firm's policy.
• D is incorrect: Donating the value to charity does not eliminate the conflict
or the policy violation.
5. A research analyst is preparing a report on a company. The analyst's
brother works in the finance department of that company. Under the CFA
Institute Standards, what is the analyst's BEST course of action?
A) Do nothing; the relationship is distant and does not affect objectivity
B) Disclose the relationship in the research report and in communications
with the compliance department
C) Ask the brother to provide inside information to improve the report's accuracy
D) Avoid covering the company altogether
Rationale:
• A is incorrect: Even a distant familial relationship can create a perceived
conflict of interest that must be disclosed.
• B is correct: Under Standard VI(A) Disclosure of Conflicts, the analyst
must disclose any potential conflicts of interest, including familial
relationships with employees of covered companies. Full disclosure
maintains transparency and objectivity.
• C is incorrect: Using a family member to obtain inside information would
violate Standard II(A) Material Nonpublic Information.
• D is incorrect: Avoiding coverage may be prudent in some cases, but the
primary requirement is disclosure; not every familial relationship requires
avoiding coverage.
Guide with Practice Questions Financial Analysis Review,
Detailed Explanations, Verified Answers, Success Workbook
Key 2026 Update: The CFA Level I curriculum has no substantive changes from
2025 to 2026. All 93 learning modules remain unchanged.
• Question Format: Multiple Choice
• Answer Key: The correct answer is bolded and highlighted in each
rationale.
• Tip: Cover the rationale and try to answer each question independently first.
SECTION 1: ETHICAL AND PROFESSIONAL STANDARDS (Questions 1–
12)
1. According to the CFA Institute Code of Ethics and Standards of
Professional Conduct, which of the following is the PRIMARY duty of a CFA
charterholder?
A) To maximize returns for all clients regardless of risk tolerance
B) To act with integrity, competence, diligence, respect, and in an ethical
manner with the public, clients, prospective clients, employers, employees,
colleagues in the investment profession, and other participants in the global
capital markets
C) To prioritize the interests of the employer over those of the client
D) To maintain confidentiality of all client information under all circumstances
Rationale:
• A is incorrect: Maximizing returns without regard to risk tolerance violates
the duty to act in the client's best interest and the suitability standard.
• B is correct: The Code of Ethics establishes the fundamental principles that
all CFA Institute members and candidates must follow. The primary duty is
, to act with integrity, competence, diligence, respect, and in an ethical
manner with all stakeholders.
• C is incorrect: Under Standard III(A) Loyalty, Prudence, and Care, the
client's interests must always take precedence over the employer's interests.
• D is incorrect: While confidentiality is important (Standard III(E)), it is not
absolute. There are exceptions, such as when disclosure is required by law or
when the client provides permission.
2. A CFA candidate is preparing a research report on a publicly traded
company. The candidate's spouse owns 500 shares of the company's stock.
Under the CFA Institute Standards of Professional Conduct, what is the
candidate's MOST appropriate course of action?
A) Do nothing; the holding is immaterial and does not affect the research
B) Disclose the spouse's ownership in the research report and, if possible, have
the report reviewed by a compliance officer
C) Sell the shares before publishing the report
D) Ask the spouse to transfer the shares to a blind trust
Rationale:
• A is incorrect: Even if the holding is small, failing to disclose a potential
conflict of interest violates Standard VI(A) Disclosure of Conflicts.
• B is correct: Under Standard VI(A) Disclosure of Conflicts, members and
candidates must disclose all matters that could reasonably be expected to
impair their objectivity. The spouse's ownership creates a potential conflict
that must be disclosed. Having the report reviewed by compliance is an
additional prudent step.
• C is incorrect: While selling the shares would eliminate the conflict, it is
not required—disclosure is sufficient. Selling may also create tax
implications or transaction costs.
• D is incorrect: Transferring to a blind trust may address the conflict but is
not the most appropriate immediate action. Disclosure is the primary
requirement.
,3. A portfolio manager receives a material, non-public tip from a company
insider about an upcoming merger. The manager does not trade on the
information but shares it with a colleague who trades on it. Under the CFA
Institute Standards, which of the following statements is MOST accurate?
A) The manager is not in violation because they did not trade personally
B) The manager is in violation of Standard II(A) Material Nonpublic
Information
C) The manager is only in violation if the insider was a client
D) The manager is in violation only if they profited from the trade
Rationale:
• A is incorrect: Standard II(A) prohibits not only trading on material
nonpublic information but also communicating it to others who may trade
on it.
• B is correct: Under Standard II(A) Material Nonpublic Information,
members and candidates who possess material nonpublic information must
not act or cause others to act on it. Sharing the tip with a colleague who
trades on it constitutes a violation, even if the manager did not trade
personally.
• C is incorrect: The source of the information does not determine the
violation; it is the use and communication of material nonpublic information
that is prohibited.
• D is incorrect: The standard prohibits both trading and tipping, regardless
of whether the tipper profits.
4. A CFA candidate is offered a gift from a client. The gift is a weekend at a
luxury resort valued at $3,000. The candidate's firm has a policy allowing gifts
up to $500. What should the candidate do?
A) Accept the gift since it is from a client
B) Decline the gift as it exceeds the firm's gift policy
C) Accept the gift but disclose it to the client's supervisor
D) Accept the gift and donate the equivalent value to charity
Rationale:
, • A is incorrect: Accepting the gift without regard to firm policy violates
Standard IV(A) Loyalty to Employer.
• B is correct: Under Standard IV(A) Loyalty to Employer, members and
candidates must comply with reasonable employer policies, including gift
policies. The gift exceeds the firm's $500 limit, so it must be declined.
• C is incorrect: Disclosing to the client's supervisor does not override the
firm's policy.
• D is incorrect: Donating the value to charity does not eliminate the conflict
or the policy violation.
5. A research analyst is preparing a report on a company. The analyst's
brother works in the finance department of that company. Under the CFA
Institute Standards, what is the analyst's BEST course of action?
A) Do nothing; the relationship is distant and does not affect objectivity
B) Disclose the relationship in the research report and in communications
with the compliance department
C) Ask the brother to provide inside information to improve the report's accuracy
D) Avoid covering the company altogether
Rationale:
• A is incorrect: Even a distant familial relationship can create a perceived
conflict of interest that must be disclosed.
• B is correct: Under Standard VI(A) Disclosure of Conflicts, the analyst
must disclose any potential conflicts of interest, including familial
relationships with employees of covered companies. Full disclosure
maintains transparency and objectivity.
• C is incorrect: Using a family member to obtain inside information would
violate Standard II(A) Material Nonpublic Information.
• D is incorrect: Avoiding coverage may be prudent in some cases, but the
primary requirement is disclosure; not every familial relationship requires
avoiding coverage.
