1
CFA LEVEL I - EXAM 2026/2027 | FINANCE
CERTIFICATION | 100 VERIFIED Q&A |
DETAILED RATIONALES | NGN-ALIGNED |
PASS GUARANTEED – A+ GRADED
SECTION 1: ETHICS AND PROFESSIONAL STANDARDS - Questions 1-15
Q1: Code of Ethics - Integrity of Capital Markets
A portfolio manager receives material nonpublic information about a company's upcoming earnings
report from a friend who works at the company. According to the CFA Institute Code of Ethics and
Standards of Professional Conduct, which of the following actions is most appropriate?
A. Use the information to trade for personal account only
B. Share the information with colleagues to benefit the entire team
C. Refrain from using the information and encourage the friend to disclose it publicly
D. Wait 24 hours before trading to avoid suspicion
Correct Answer: C
Rationale: Standard II(A) - Material Nonpublic Information prohibits CFA members from acting or
causing others to act on material nonpublic information. The most appropriate action is to refrain
from using the information and encourage proper public disclosure. Trading on such information,
whether for personal or team benefit, violates the standard. Waiting 24 hours does not eliminate
the violation. [100% CORRECT]
Q2: Standards of Professional Conduct - Independence and Objectivity
An investment analyst is preparing a research report on a company. The company's CEO offers to
pay for the analyst to attend a lavish conference in Hawaii where the CEO will be speaking.
According to CFA Institute Standards, the analyst should:
A. Accept the offer since it relates to professional development
B. Accept the offer but disclose it in the research report
C. Decline the offer or ensure proper disclosure and obtain permission from employer
D. Accept only if the conference has educational value
Correct Answer: C
Rationale: Standard I(B) - Independence and Objectivity requires members to maintain
independence and objectivity. Accepting lavish gifts or entertainment from companies being
analyzed could compromise objectivity. The analyst should either decline or ensure full disclosure to
employer and obtain proper permission. Modest gifts may be acceptable with disclosure, but lavish
travel and entertainment create conflicts. [100% CORRECT]
,2
Q3: Code of Ethics - Duties to Clients
A portfolio manager has discretionary authority over client accounts. The manager allocates highly
profitable IPO shares to certain accounts while allocating less profitable shares to other accounts
based on account size. This practice is:
A. Acceptable if disclosed to all clients
B. Acceptable if larger accounts receive preferential treatment
C. A violation of fair dealing provisions
D. Acceptable if the manager believes it benefits overall portfolio performance
Correct Answer: C
Rationale: Standard III(B) - Fair Dealing requires members to deal fairly and objectively with all
clients when providing investment analysis, making recommendations, or taking investment action.
Allocating IPO shares based on account size rather than a fair and disclosed allocation method
violates fair dealing principles. Disclosure does not cure the underlying unfairness. [100% CORRECT]
Q4: Ethical Decision Making - GIPS Compliance
An investment firm claims compliance with Global Investment Performance Standards (GIPS) but has
not been verified by an independent third party. According to GIPS requirements, the firm:
A. Cannot claim GIPS compliance without verification
B. Must disclose whether the performance has been verified
C. Must obtain verification within one year of claiming compliance
D. Can claim compliance without verification but must disclose the lack of verification
Correct Answer: B
Rationale: GIPS verification is recommended but not required. Firms claiming GIPS compliance must
disclose whether their performance has been verified by an independent third party. The claim of
compliance itself does not require verification, but transparency regarding verification status is
mandatory. [100% CORRECT]
Q5: Standards of Practice - Communication with Clients
A CFA charterholder is preparing marketing materials for a new investment product. The materials
include projected returns based on back-tested data. According to Standards of Professional
Conduct, the charterholder must:
A. Only show the highest historical returns
B. Clearly distinguish between actual and projected/back-tested returns
C. Guarantee minimum returns to attract investors
D. Omit information about the methodology used
Correct Answer: B
Rationale: Standard III(D) - Performance Presentation requires members to make reasonable efforts
to ensure that investment performance information is fair, accurate, and complete. Back-tested or
projected returns must be clearly distinguished from actual performance, and the methodology
should be disclosed. [100% CORRECT]
,3
Q6: Code of Ethics - Misrepresentation
An analyst includes a forecast in a research report that she believes is overly optimistic but includes
it anyway because her supervisor requested it. According to CFA Standards, the analyst has:
A. Not violated any standard since she followed supervisor instructions
B. Violated the standard on misrepresentation
C. Acted appropriately if the forecast is labeled as speculative
D. No obligation since forecasts are inherently uncertain
Correct Answer: B
Rationale: Standard I(C) - Misrepresentation prohibits members from knowingly making any
misrepresentations relating to investment analysis, recommendations, or other professional
activities. Including a forecast the analyst believes is misleading violates this standard regardless of
supervisor instructions. [100% CORRECT]
Q7: Standards of Professional Conduct - Referral Fees
A financial advisor receives a referral fee from a mortgage broker for every client she refers for
mortgage services. According to CFA Standards, the advisor must:
A. Keep the arrangement confidential
B. Disclose the referral arrangement to clients and employer
C. Only disclose if the client asks
D. Refuse referral fees as they are always prohibited
Correct Answer: B
Rationale: Standard VI(C) - Referral Fees requires members to disclose to clients and prospective
clients, and their employer, any compensation or benefit received for referral of products or
services. This disclosure allows clients to evaluate potential conflicts of interest. [100% CORRECT]
Q8: Asset Manager Code of Professional Conduct
Which of the following is NOT a component of the Asset Manager Code of Professional Conduct?
A. Loyalty to clients
B. Investment process and actions
C. Guaranteeing minimum returns
D. Trading and compliance
Correct Answer: C
Rationale: The Asset Manager Code of Professional Conduct covers six areas: loyalty to clients,
investment process and actions, trading, risk management, compliance and support, and
performance and valuation. Guaranteeing minimum returns is not included and would violate ethical
standards regarding misrepresentation. [100% CORRECT]
Q9: Ethics - Confidentiality
, 4
A CFA member who works at an investment firm is approached by a client who asks about another
client's account performance. The member should:
A. Share the information since both are clients of the firm
B. Provide general industry benchmarks but not specific client information
C. Refuse to provide any information and explain confidentiality obligations
D. Share only the information that is positive
Correct Answer: C
Rationale: Standard III(E) - Preservation of Confidentiality requires members to keep information
about current, former, and prospective clients confidential unless disclosure is required by law, the
client permits disclosure, or disclosure is necessary for the firm to fulfill its responsibilities. Client
account information cannot be shared with other clients. [100% CORRECT]
Q10: Professionalism - Knowledge of the Law
A CFA member discovers that a colleague is engaging in insider trading. According to the Standards,
the member should:
A. Ignore the activity since it is not their responsibility
B. Immediately report the activity to appropriate authorities and/or employer
C. Confront the colleague privately only
D. Wait for the regulatory authority to discover the activity
Correct Answer: B
Rationale: Standard I(A) - Knowledge of the Law requires members to understand and comply with
applicable laws and regulations. Upon discovering violations, members must disassociate themselves
from the activity and report it to appropriate authorities or employer. Inaction constitutes a
violation. [100% CORRECT]
Q11: Investment Analysis - Reasonable Basis
Before making an investment recommendation, a CFA member must:
A. Rely solely on published analyst reports
B. Have a reasonable and adequate basis supported by appropriate research
C. Consult only with colleagues who agree with the recommendation
D. Focus exclusively on technical analysis
Correct Answer: B
Rationale: Standard V(A) - Diligence and Reasonable Basis requires members to exercise diligence,
independence, and thoroughness in analyzing investments and making recommendations. The
analysis should have a reasonable and adequate basis supported by appropriate research and
investigation. [100% CORRECT]
Q12: Conflicts of Interest - Priority of Transactions
CFA LEVEL I - EXAM 2026/2027 | FINANCE
CERTIFICATION | 100 VERIFIED Q&A |
DETAILED RATIONALES | NGN-ALIGNED |
PASS GUARANTEED – A+ GRADED
SECTION 1: ETHICS AND PROFESSIONAL STANDARDS - Questions 1-15
Q1: Code of Ethics - Integrity of Capital Markets
A portfolio manager receives material nonpublic information about a company's upcoming earnings
report from a friend who works at the company. According to the CFA Institute Code of Ethics and
Standards of Professional Conduct, which of the following actions is most appropriate?
A. Use the information to trade for personal account only
B. Share the information with colleagues to benefit the entire team
C. Refrain from using the information and encourage the friend to disclose it publicly
D. Wait 24 hours before trading to avoid suspicion
Correct Answer: C
Rationale: Standard II(A) - Material Nonpublic Information prohibits CFA members from acting or
causing others to act on material nonpublic information. The most appropriate action is to refrain
from using the information and encourage proper public disclosure. Trading on such information,
whether for personal or team benefit, violates the standard. Waiting 24 hours does not eliminate
the violation. [100% CORRECT]
Q2: Standards of Professional Conduct - Independence and Objectivity
An investment analyst is preparing a research report on a company. The company's CEO offers to
pay for the analyst to attend a lavish conference in Hawaii where the CEO will be speaking.
According to CFA Institute Standards, the analyst should:
A. Accept the offer since it relates to professional development
B. Accept the offer but disclose it in the research report
C. Decline the offer or ensure proper disclosure and obtain permission from employer
D. Accept only if the conference has educational value
Correct Answer: C
Rationale: Standard I(B) - Independence and Objectivity requires members to maintain
independence and objectivity. Accepting lavish gifts or entertainment from companies being
analyzed could compromise objectivity. The analyst should either decline or ensure full disclosure to
employer and obtain proper permission. Modest gifts may be acceptable with disclosure, but lavish
travel and entertainment create conflicts. [100% CORRECT]
,2
Q3: Code of Ethics - Duties to Clients
A portfolio manager has discretionary authority over client accounts. The manager allocates highly
profitable IPO shares to certain accounts while allocating less profitable shares to other accounts
based on account size. This practice is:
A. Acceptable if disclosed to all clients
B. Acceptable if larger accounts receive preferential treatment
C. A violation of fair dealing provisions
D. Acceptable if the manager believes it benefits overall portfolio performance
Correct Answer: C
Rationale: Standard III(B) - Fair Dealing requires members to deal fairly and objectively with all
clients when providing investment analysis, making recommendations, or taking investment action.
Allocating IPO shares based on account size rather than a fair and disclosed allocation method
violates fair dealing principles. Disclosure does not cure the underlying unfairness. [100% CORRECT]
Q4: Ethical Decision Making - GIPS Compliance
An investment firm claims compliance with Global Investment Performance Standards (GIPS) but has
not been verified by an independent third party. According to GIPS requirements, the firm:
A. Cannot claim GIPS compliance without verification
B. Must disclose whether the performance has been verified
C. Must obtain verification within one year of claiming compliance
D. Can claim compliance without verification but must disclose the lack of verification
Correct Answer: B
Rationale: GIPS verification is recommended but not required. Firms claiming GIPS compliance must
disclose whether their performance has been verified by an independent third party. The claim of
compliance itself does not require verification, but transparency regarding verification status is
mandatory. [100% CORRECT]
Q5: Standards of Practice - Communication with Clients
A CFA charterholder is preparing marketing materials for a new investment product. The materials
include projected returns based on back-tested data. According to Standards of Professional
Conduct, the charterholder must:
A. Only show the highest historical returns
B. Clearly distinguish between actual and projected/back-tested returns
C. Guarantee minimum returns to attract investors
D. Omit information about the methodology used
Correct Answer: B
Rationale: Standard III(D) - Performance Presentation requires members to make reasonable efforts
to ensure that investment performance information is fair, accurate, and complete. Back-tested or
projected returns must be clearly distinguished from actual performance, and the methodology
should be disclosed. [100% CORRECT]
,3
Q6: Code of Ethics - Misrepresentation
An analyst includes a forecast in a research report that she believes is overly optimistic but includes
it anyway because her supervisor requested it. According to CFA Standards, the analyst has:
A. Not violated any standard since she followed supervisor instructions
B. Violated the standard on misrepresentation
C. Acted appropriately if the forecast is labeled as speculative
D. No obligation since forecasts are inherently uncertain
Correct Answer: B
Rationale: Standard I(C) - Misrepresentation prohibits members from knowingly making any
misrepresentations relating to investment analysis, recommendations, or other professional
activities. Including a forecast the analyst believes is misleading violates this standard regardless of
supervisor instructions. [100% CORRECT]
Q7: Standards of Professional Conduct - Referral Fees
A financial advisor receives a referral fee from a mortgage broker for every client she refers for
mortgage services. According to CFA Standards, the advisor must:
A. Keep the arrangement confidential
B. Disclose the referral arrangement to clients and employer
C. Only disclose if the client asks
D. Refuse referral fees as they are always prohibited
Correct Answer: B
Rationale: Standard VI(C) - Referral Fees requires members to disclose to clients and prospective
clients, and their employer, any compensation or benefit received for referral of products or
services. This disclosure allows clients to evaluate potential conflicts of interest. [100% CORRECT]
Q8: Asset Manager Code of Professional Conduct
Which of the following is NOT a component of the Asset Manager Code of Professional Conduct?
A. Loyalty to clients
B. Investment process and actions
C. Guaranteeing minimum returns
D. Trading and compliance
Correct Answer: C
Rationale: The Asset Manager Code of Professional Conduct covers six areas: loyalty to clients,
investment process and actions, trading, risk management, compliance and support, and
performance and valuation. Guaranteeing minimum returns is not included and would violate ethical
standards regarding misrepresentation. [100% CORRECT]
Q9: Ethics - Confidentiality
, 4
A CFA member who works at an investment firm is approached by a client who asks about another
client's account performance. The member should:
A. Share the information since both are clients of the firm
B. Provide general industry benchmarks but not specific client information
C. Refuse to provide any information and explain confidentiality obligations
D. Share only the information that is positive
Correct Answer: C
Rationale: Standard III(E) - Preservation of Confidentiality requires members to keep information
about current, former, and prospective clients confidential unless disclosure is required by law, the
client permits disclosure, or disclosure is necessary for the firm to fulfill its responsibilities. Client
account information cannot be shared with other clients. [100% CORRECT]
Q10: Professionalism - Knowledge of the Law
A CFA member discovers that a colleague is engaging in insider trading. According to the Standards,
the member should:
A. Ignore the activity since it is not their responsibility
B. Immediately report the activity to appropriate authorities and/or employer
C. Confront the colleague privately only
D. Wait for the regulatory authority to discover the activity
Correct Answer: B
Rationale: Standard I(A) - Knowledge of the Law requires members to understand and comply with
applicable laws and regulations. Upon discovering violations, members must disassociate themselves
from the activity and report it to appropriate authorities or employer. Inaction constitutes a
violation. [100% CORRECT]
Q11: Investment Analysis - Reasonable Basis
Before making an investment recommendation, a CFA member must:
A. Rely solely on published analyst reports
B. Have a reasonable and adequate basis supported by appropriate research
C. Consult only with colleagues who agree with the recommendation
D. Focus exclusively on technical analysis
Correct Answer: B
Rationale: Standard V(A) - Diligence and Reasonable Basis requires members to exercise diligence,
independence, and thoroughness in analyzing investments and making recommendations. The
analysis should have a reasonable and adequate basis supported by appropriate research and
investigation. [100% CORRECT]
Q12: Conflicts of Interest - Priority of Transactions
