Page 1 of 48
CFA LEVEL I 2026–2027 STUDY GUIDE: ETHICS
PRACTICE EXAM BANK: 100 QUESTIONS WITH
DETAILED RATIONALES
Law ( Professional Ethics ) / Accounting (Finance , Investment )
Exam coverage:
❖ Section 1 (Q1–15): Foundations of ethics, ethical decision
making, and the relationship between law and ethics.
❖ Section 2 (Q16–30): The six components of the CFA Institute
Code of Ethics.
❖ Section 3 (Q31–45): Standard I – Professionalism, including
knowledge of the law, independence, misrepresentation, and
misconduct.
❖ Section 4 (Q46–55): Standard II – Integrity of Capital Markets,
including material nonpublic information and market
manipulation.
❖ Section 5 (Q56–65): Standard III – Duties to Clients, including
loyalty, fair dealing, suitability, and confidentiality.
❖ Section 6 (Q66–70): Standard IV – Duties to Employers,
including loyalty, additional compensation, and supervisory
responsibilities.
, Page 2 of 48
❖ Section 7 (Q71–80): Standard V – Investment Analysis,
Recommendations, and Actions, including diligence,
communication, and record retention.
❖ Section 8 (Q81–90): Standard VI – Conflicts of Interest,
including disclosure, priority of transactions, and referral
fees.
❖ Section 9 (Q91–100): Standard VII – Responsibilities as a CFA
Institute Member or Candidate.
Section 1: Foundations of Ethics & Ethical Decision Making
(Questions 1–15)
Question 1
A candidate is beginning their study of the CFA Level I Ethics
curriculum. The candidate must understand the foundational
definition of ethics. Which of the following best describes
ethics?
A. Following all applicable laws and regulations
B. A person's own individual ideas of right and wrong
C. Moral principles that guide behavior, often shared by a
community or group
D. Maximizing profits while staying within legal boundaries
CORRECT ANSWER: C
RATIONALE: Ethics refers to a set of moral principles that guide
behavior, often shared by a community or group. Option A is
, Page 3 of 48
legal compliance, not ethics. Option B describes subjective
personal morality. Option D is an economic objective.
Question 2
A financial analyst is discussing the relationship between ethics
and the law. Which of the following statements best describes
the relationship between law and ethics?
A. All legal actions are ethical, and all ethical actions are legal.
B. An action can be legal but unethical, and an action can be
ethical but illegal.
C. Ethics and law are completely unrelated.
D. Legal compliance is the highest standard of ethical behavior.
CORRECT ANSWER: B
RATIONALE: An action can be legal but unethical (e.g.,
exploiting a loophole), and an action can be ethical but illegal
(e.g., civil disobedience). Option A is incorrect because the two
are not perfectly aligned. Option C is incorrect because law and
ethics are related. Option D is incorrect because legal
compliance is a minimum standard.
Question 3
A candidate is studying the ethical responsibilities of CFA
members and candidates. Which of the following best describes
the purpose of the CFA Institute Code of Ethics?
A. To maximize shareholder returns
B. To define fundamental ethical principles that all CFA
members and candidates must uphold
C. To replace all local laws and regulations
, Page 4 of 48
D. To provide a list of prohibited securities
CORRECT ANSWER: B
RATIONALE: The CFA Institute Code of Ethics is a framework
that defines the fundamental principles all CFA members and
candidates must uphold. Option A is an economic objective.
Option C is incorrect because the Code does not replace local
laws. Option D is unrelated.
Question 4
A CFA candidate is learning about the structure of the CFA
Institute Code of Ethics and Standards of Professional Conduct.
How many components does the Code of Ethics contain?
A. Four
B. Five
C. Six
D. Seven
CORRECT ANSWER: C
RATIONALE: The Code of Ethics contains six components. The
seven Standards of Professional Conduct are separate from the
Code.
Question 5
A candidate is reviewing the learning outcomes for the Ethics
topic. The candidate must identify how many Standards of
Professional Conduct exist under the CFA Institute framework.
How many Standards of Professional Conduct are there?
A. Five
B. Six
CFA LEVEL I 2026–2027 STUDY GUIDE: ETHICS
PRACTICE EXAM BANK: 100 QUESTIONS WITH
DETAILED RATIONALES
Law ( Professional Ethics ) / Accounting (Finance , Investment )
Exam coverage:
❖ Section 1 (Q1–15): Foundations of ethics, ethical decision
making, and the relationship between law and ethics.
❖ Section 2 (Q16–30): The six components of the CFA Institute
Code of Ethics.
❖ Section 3 (Q31–45): Standard I – Professionalism, including
knowledge of the law, independence, misrepresentation, and
misconduct.
❖ Section 4 (Q46–55): Standard II – Integrity of Capital Markets,
including material nonpublic information and market
manipulation.
❖ Section 5 (Q56–65): Standard III – Duties to Clients, including
loyalty, fair dealing, suitability, and confidentiality.
❖ Section 6 (Q66–70): Standard IV – Duties to Employers,
including loyalty, additional compensation, and supervisory
responsibilities.
, Page 2 of 48
❖ Section 7 (Q71–80): Standard V – Investment Analysis,
Recommendations, and Actions, including diligence,
communication, and record retention.
❖ Section 8 (Q81–90): Standard VI – Conflicts of Interest,
including disclosure, priority of transactions, and referral
fees.
❖ Section 9 (Q91–100): Standard VII – Responsibilities as a CFA
Institute Member or Candidate.
Section 1: Foundations of Ethics & Ethical Decision Making
(Questions 1–15)
Question 1
A candidate is beginning their study of the CFA Level I Ethics
curriculum. The candidate must understand the foundational
definition of ethics. Which of the following best describes
ethics?
A. Following all applicable laws and regulations
B. A person's own individual ideas of right and wrong
C. Moral principles that guide behavior, often shared by a
community or group
D. Maximizing profits while staying within legal boundaries
CORRECT ANSWER: C
RATIONALE: Ethics refers to a set of moral principles that guide
behavior, often shared by a community or group. Option A is
, Page 3 of 48
legal compliance, not ethics. Option B describes subjective
personal morality. Option D is an economic objective.
Question 2
A financial analyst is discussing the relationship between ethics
and the law. Which of the following statements best describes
the relationship between law and ethics?
A. All legal actions are ethical, and all ethical actions are legal.
B. An action can be legal but unethical, and an action can be
ethical but illegal.
C. Ethics and law are completely unrelated.
D. Legal compliance is the highest standard of ethical behavior.
CORRECT ANSWER: B
RATIONALE: An action can be legal but unethical (e.g.,
exploiting a loophole), and an action can be ethical but illegal
(e.g., civil disobedience). Option A is incorrect because the two
are not perfectly aligned. Option C is incorrect because law and
ethics are related. Option D is incorrect because legal
compliance is a minimum standard.
Question 3
A candidate is studying the ethical responsibilities of CFA
members and candidates. Which of the following best describes
the purpose of the CFA Institute Code of Ethics?
A. To maximize shareholder returns
B. To define fundamental ethical principles that all CFA
members and candidates must uphold
C. To replace all local laws and regulations
, Page 4 of 48
D. To provide a list of prohibited securities
CORRECT ANSWER: B
RATIONALE: The CFA Institute Code of Ethics is a framework
that defines the fundamental principles all CFA members and
candidates must uphold. Option A is an economic objective.
Option C is incorrect because the Code does not replace local
laws. Option D is unrelated.
Question 4
A CFA candidate is learning about the structure of the CFA
Institute Code of Ethics and Standards of Professional Conduct.
How many components does the Code of Ethics contain?
A. Four
B. Five
C. Six
D. Seven
CORRECT ANSWER: C
RATIONALE: The Code of Ethics contains six components. The
seven Standards of Professional Conduct are separate from the
Code.
Question 5
A candidate is reviewing the learning outcomes for the Ethics
topic. The candidate must identify how many Standards of
Professional Conduct exist under the CFA Institute framework.
How many Standards of Professional Conduct are there?
A. Five
B. Six
