NEW YORK REGISTRATION AND COMPLIANCE
ASPECTS OF THE CHARTERED FINANCIAL ANALYST
(CFA) EXAM QUESTION AND CORRECT ANSWERS
WITH RATIONALE |2026 UPDATE |100% PASS
1. All CFA Institute members and candidates must:
A) Register with the SEC
B) Register with the New York Stock Exchange
C) Comply with the CFA Code of Ethics and Standards of Professional Conduct
D) Register with the New York Department of Financial Services
Answer: C
Rationale: All CFA Institute members and candidates are required to comply with the CFA
Institute Code of Ethics and Standards of Professional Conduct. Registration with specific
regulatory bodies like the SEC or NYSE depends on employment activities, not CFA membership
status .
2. According to Standard I(A) Knowledge of the Law, if a member or candidate encounters a
situation where applicable laws and the CFA Code conflict, they must:
A) Follow the CFA Code regardless of local law
B) Follow the more strict law or regulation
C) Follow their employer's policy
D) Ignore both and follow industry practice
Answer: B
,Rationale: Standard I(A) requires members and candidates to comply with the most strict
applicable law, regulation, or the CFA Code of Ethics. If local law is stricter than the Code,
members must follow local law; if the Code is stricter, they must follow the Code.
3. Information that is not widely disseminated to the investing public is considered:
A) Public information
B) Nonpublic information
C) Mosaic theory information
D) Material information
Answer: B
Rationale: Nonpublic information is defined as information that has not been broadly
disseminated to the investing public. This is a key concept under Standard II(A) Material
Nonpublic Information .
4. The mosaic theory describes an analyst's gathering of which types of information to form an
investment opinion?
A) Material and/or public information
B) Nonmaterial and/or public information
C) Material nonpublic information only
D) Nonmaterial and/or nonpublic information combined with public information
Answer: D
Rationale: The mosaic theory permits analysts to combine nonmaterial nonpublic information
(such as channel checks or expert insights) with public information to form an investment
conclusion without violating insider trading rules, as long as no material nonpublic information
is used .
,5. Information that a publicly traded firm released selectively to a small group of analysts is an
example of:
A) Public disclosure
B) Selective disclosure
C) Public discourse
D) Regulatory filing
Answer: B
Rationale: Selective disclosure occurs when a company provides material information to a
limited group before disseminating it to the general public. Under Regulation FD (Fair
Disclosure) in the US and Standard II(A), such practices are prohibited .
6. What is a key characteristic that makes information "material"?
A) The information is about earnings
B) A reasonable investor would want to know the information before making an investment
decision
C) The information comes from a reliable source
D) The information is numerical
Answer: B
Rationale: Information is material if its disclosure would likely affect the price of a security or if
a reasonable investor would consider it important in making an investment decision. Both
prongs of this definition are recognized in securities law and the CFA Standards .
7. Informationbased manipulation includes which of the following practices?
A) Frontrunning
B) Pump and dump schemes and spreading false information
C) Program trading
, D) Highfrequency trading
Answer: B
Rationale: Informationbased manipulation includes spreading false information to affect
security prices, such as "pump and dump" schemes where false positive information is
disseminated to inflate prices before selling .
8. The practice of "layering" in securities markets involves:
A) Executing trades at multiple venues simultaneously
B) Entering multiple nonbona fide orders on one side of the market at various price levels to
create false appearance of demand or supply
C) Placing limit orders at multiple price levels for genuine trading purposes
D) Using algorithms to find best execution
Answer: B
Rationale: Layering is a form of market manipulation where multiple nonbona fide orders are
entered away from the best bid or offer to create false appearance of changing supply and
demand, followed by execution on the opposite side at the artificially created price .
9. Market integrity requires that investors be confident that:
A) All investors will make profits
B) Investment prices reflect genuine forces of supply and demand
C) Insider trading is permitted for professionals
D) Market makers always profit
Answer: B
ASPECTS OF THE CHARTERED FINANCIAL ANALYST
(CFA) EXAM QUESTION AND CORRECT ANSWERS
WITH RATIONALE |2026 UPDATE |100% PASS
1. All CFA Institute members and candidates must:
A) Register with the SEC
B) Register with the New York Stock Exchange
C) Comply with the CFA Code of Ethics and Standards of Professional Conduct
D) Register with the New York Department of Financial Services
Answer: C
Rationale: All CFA Institute members and candidates are required to comply with the CFA
Institute Code of Ethics and Standards of Professional Conduct. Registration with specific
regulatory bodies like the SEC or NYSE depends on employment activities, not CFA membership
status .
2. According to Standard I(A) Knowledge of the Law, if a member or candidate encounters a
situation where applicable laws and the CFA Code conflict, they must:
A) Follow the CFA Code regardless of local law
B) Follow the more strict law or regulation
C) Follow their employer's policy
D) Ignore both and follow industry practice
Answer: B
,Rationale: Standard I(A) requires members and candidates to comply with the most strict
applicable law, regulation, or the CFA Code of Ethics. If local law is stricter than the Code,
members must follow local law; if the Code is stricter, they must follow the Code.
3. Information that is not widely disseminated to the investing public is considered:
A) Public information
B) Nonpublic information
C) Mosaic theory information
D) Material information
Answer: B
Rationale: Nonpublic information is defined as information that has not been broadly
disseminated to the investing public. This is a key concept under Standard II(A) Material
Nonpublic Information .
4. The mosaic theory describes an analyst's gathering of which types of information to form an
investment opinion?
A) Material and/or public information
B) Nonmaterial and/or public information
C) Material nonpublic information only
D) Nonmaterial and/or nonpublic information combined with public information
Answer: D
Rationale: The mosaic theory permits analysts to combine nonmaterial nonpublic information
(such as channel checks or expert insights) with public information to form an investment
conclusion without violating insider trading rules, as long as no material nonpublic information
is used .
,5. Information that a publicly traded firm released selectively to a small group of analysts is an
example of:
A) Public disclosure
B) Selective disclosure
C) Public discourse
D) Regulatory filing
Answer: B
Rationale: Selective disclosure occurs when a company provides material information to a
limited group before disseminating it to the general public. Under Regulation FD (Fair
Disclosure) in the US and Standard II(A), such practices are prohibited .
6. What is a key characteristic that makes information "material"?
A) The information is about earnings
B) A reasonable investor would want to know the information before making an investment
decision
C) The information comes from a reliable source
D) The information is numerical
Answer: B
Rationale: Information is material if its disclosure would likely affect the price of a security or if
a reasonable investor would consider it important in making an investment decision. Both
prongs of this definition are recognized in securities law and the CFA Standards .
7. Informationbased manipulation includes which of the following practices?
A) Frontrunning
B) Pump and dump schemes and spreading false information
C) Program trading
, D) Highfrequency trading
Answer: B
Rationale: Informationbased manipulation includes spreading false information to affect
security prices, such as "pump and dump" schemes where false positive information is
disseminated to inflate prices before selling .
8. The practice of "layering" in securities markets involves:
A) Executing trades at multiple venues simultaneously
B) Entering multiple nonbona fide orders on one side of the market at various price levels to
create false appearance of demand or supply
C) Placing limit orders at multiple price levels for genuine trading purposes
D) Using algorithms to find best execution
Answer: B
Rationale: Layering is a form of market manipulation where multiple nonbona fide orders are
entered away from the best bid or offer to create false appearance of changing supply and
demand, followed by execution on the opposite side at the artificially created price .
9. Market integrity requires that investors be confident that:
A) All investors will make profits
B) Investment prices reflect genuine forces of supply and demand
C) Insider trading is permitted for professionals
D) Market makers always profit
Answer: B
