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CFA LEVEL I–III EXAM 2026 – 2027 LATEST
VERSION QUESTIONS AND ANSWERS 2026
EDITION
CFA Level I–III Exam: 250 Practice Questions with Rationales
UNIT 1: ETHICAL AND PROFESSIONAL STANDARDS (25 Questions)
1. The Standards of Professional Conduct include which of the following duties?
A) Only duties to clients
B) Duties to employers and clients only
C) Duties to the public, clients, prospective clients, employers, and the profession
D) Duties only to the investment profession
Answer: C) Duties to the public, clients, prospective clients, employers, and the
profession
Rationale: The Standards of Professional Conduct encompass duties to the public,
clients, prospective clients, employers, and the investment profession. This
comprehensive framework ensures ethical behavior across all stakeholder
relationships .
2. According to the Code of Ethics, CFA Institute members must:
A) Place their own interests ahead of clients
B) Place clients' interests ahead of their own
C) Maximize profits at all costs
D) Follow only the laws of their home country
Answer: B) Place clients' interests ahead of their own
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Rationale: The Code of Ethics requires members to place the integrity of the investment
profession and the interests of clients above their own personal interests. This is a
fundamental fiduciary duty .
3. Which of the following best describes the GIPS standards?
A) A set of mandatory global accounting standards
B) Voluntary ethical standards for presenting investment performance
C) Legal requirements enforced by regulators
D) Standards for auditing financial statements
Answer: B) Voluntary ethical standards for presenting investment performance
Rationale: The Global Investment Performance Standards (GIPS) are voluntary ethical
standards for presenting investment performance to ensure fair representation and full
disclosure. Compliance is not mandatory but is recommended for firms .
4. A CFA charterholder discovers an error in a report previously provided to a client.
The charterholder should:
A) Ignore the error since the report was already provided
B) Immediately disclose the error to the client
C) Correct the error in the next report
D) Only correct the error if the client complains
Answer: B) Immediately disclose the error to the client
Rationale: Standard I(C) Misrepresentation requires members to immediately disclose
any material errors in previously provided information. This maintains trust and fulfills
the duty of fair dealing.
5. The Code of Ethics requires CFA Institute members to:
A) Promote the integrity of the investment profession
B) Engage in any activities that maximize personal gain
C) Avoid all conflicts of interest
D) Only work for CFA Institute-approved employers
Answer: A) Promote the integrity of the investment profession
Rationale: The Code of Ethics states that members shall promote the integrity of and
uphold the rules governing the investment profession. This includes acting with integrity,
competence, and diligence .
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6. Standard VI(A) Disclosure of Conflicts requires members to:
A) Avoid all potential conflicts of interest
B) Disclose conflicts of interest to clients and employers
C) Only disclose conflicts if asked
D) Resign if conflicts exist
Answer: B) Disclose conflicts of interest to clients and employers
Rationale: Standard VI(A) requires full disclosure of any conflicts of interest to clients
and employers. This allows clients to evaluate the impact of such conflicts on the
advice or services provided.
7. When clients provide material nonpublic information to their advisor, the advisor
should:
A) Use the information to trade
B) Share the information with colleagues
C) Refuse to accept or act on the information
D) Report the information to regulators immediately
Answer: C) Refuse to accept or act on the information
Rationale: Standard II(A) Material Nonpublic Information prohibits acting on material
nonpublic information. Members and candidates should not accept such information
and must inform the client accordingly.
8. A member who has a family relationship with a client must:
A) Disclose the relationship to the employer
B) Not provide services to family members
C) Decline to manage the client's account
D) Place the client's interests above personal relationships
Answer: D) Place the client's interests above personal relationships
Rationale: Standard VI(A) Disclosure of Conflicts requires members to be aware of
conflicts that may arise from family relationships. Members must ensure that client
interests are prioritized.
9. The primary purpose of the Standards of Professional Conduct is to:
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A) Increase the profitability of investment firms
B) Guide professional behavior and protect clients
C) Define legal requirements for investment advisors
D) Establish minimum education requirements
Answer: B) Guide professional behavior and protect clients
Rationale: The Standards of Professional Conduct provide specific guidance on
professional behavior to protect clients and the integrity of the investment profession.
They establish the ethical framework for CFA charterholders.
10. Standard IV(A) Loyalty requires members to:
A) Always prioritize their employer over clients
B) Act in good faith and in the best interests of their employer
C) Seek personal gain from employer relationships
D) Only work for one employer at a time
Answer: B) Act in good faith and in the best interests of their employer
Rationale: Standard IV(A) requires members to act in good faith and in the best interests
of their employer. This includes not engaging in activities that harm the employer and
maintaining professional conduct.
11. A member's duty to maintain client confidentiality includes:
A) Sharing information with other clients for marketing purposes
B) Disclosing information only with client permission
C) Reporting client activities to regulators without consent
D) Discussing client cases with family members
Answer: B) Disclosing information only with client permission
Rationale: Standard III(E) Preservation of Confidentiality requires members to keep
client information confidential unless disclosure is required by law or the client provides
permission.
12. According to Standard I(D) Misconduct, members must:
A) Engage in any legal activity to benefit clients
B) Avoid any conduct involving dishonesty, fraud, or deceit
C) Only act in their own best interest
D) Report all client activities to employers
CFA LEVEL I–III EXAM 2026 – 2027 LATEST
VERSION QUESTIONS AND ANSWERS 2026
EDITION
CFA Level I–III Exam: 250 Practice Questions with Rationales
UNIT 1: ETHICAL AND PROFESSIONAL STANDARDS (25 Questions)
1. The Standards of Professional Conduct include which of the following duties?
A) Only duties to clients
B) Duties to employers and clients only
C) Duties to the public, clients, prospective clients, employers, and the profession
D) Duties only to the investment profession
Answer: C) Duties to the public, clients, prospective clients, employers, and the
profession
Rationale: The Standards of Professional Conduct encompass duties to the public,
clients, prospective clients, employers, and the investment profession. This
comprehensive framework ensures ethical behavior across all stakeholder
relationships .
2. According to the Code of Ethics, CFA Institute members must:
A) Place their own interests ahead of clients
B) Place clients' interests ahead of their own
C) Maximize profits at all costs
D) Follow only the laws of their home country
Answer: B) Place clients' interests ahead of their own
, Page 2 of 78
Rationale: The Code of Ethics requires members to place the integrity of the investment
profession and the interests of clients above their own personal interests. This is a
fundamental fiduciary duty .
3. Which of the following best describes the GIPS standards?
A) A set of mandatory global accounting standards
B) Voluntary ethical standards for presenting investment performance
C) Legal requirements enforced by regulators
D) Standards for auditing financial statements
Answer: B) Voluntary ethical standards for presenting investment performance
Rationale: The Global Investment Performance Standards (GIPS) are voluntary ethical
standards for presenting investment performance to ensure fair representation and full
disclosure. Compliance is not mandatory but is recommended for firms .
4. A CFA charterholder discovers an error in a report previously provided to a client.
The charterholder should:
A) Ignore the error since the report was already provided
B) Immediately disclose the error to the client
C) Correct the error in the next report
D) Only correct the error if the client complains
Answer: B) Immediately disclose the error to the client
Rationale: Standard I(C) Misrepresentation requires members to immediately disclose
any material errors in previously provided information. This maintains trust and fulfills
the duty of fair dealing.
5. The Code of Ethics requires CFA Institute members to:
A) Promote the integrity of the investment profession
B) Engage in any activities that maximize personal gain
C) Avoid all conflicts of interest
D) Only work for CFA Institute-approved employers
Answer: A) Promote the integrity of the investment profession
Rationale: The Code of Ethics states that members shall promote the integrity of and
uphold the rules governing the investment profession. This includes acting with integrity,
competence, and diligence .
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6. Standard VI(A) Disclosure of Conflicts requires members to:
A) Avoid all potential conflicts of interest
B) Disclose conflicts of interest to clients and employers
C) Only disclose conflicts if asked
D) Resign if conflicts exist
Answer: B) Disclose conflicts of interest to clients and employers
Rationale: Standard VI(A) requires full disclosure of any conflicts of interest to clients
and employers. This allows clients to evaluate the impact of such conflicts on the
advice or services provided.
7. When clients provide material nonpublic information to their advisor, the advisor
should:
A) Use the information to trade
B) Share the information with colleagues
C) Refuse to accept or act on the information
D) Report the information to regulators immediately
Answer: C) Refuse to accept or act on the information
Rationale: Standard II(A) Material Nonpublic Information prohibits acting on material
nonpublic information. Members and candidates should not accept such information
and must inform the client accordingly.
8. A member who has a family relationship with a client must:
A) Disclose the relationship to the employer
B) Not provide services to family members
C) Decline to manage the client's account
D) Place the client's interests above personal relationships
Answer: D) Place the client's interests above personal relationships
Rationale: Standard VI(A) Disclosure of Conflicts requires members to be aware of
conflicts that may arise from family relationships. Members must ensure that client
interests are prioritized.
9. The primary purpose of the Standards of Professional Conduct is to:
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A) Increase the profitability of investment firms
B) Guide professional behavior and protect clients
C) Define legal requirements for investment advisors
D) Establish minimum education requirements
Answer: B) Guide professional behavior and protect clients
Rationale: The Standards of Professional Conduct provide specific guidance on
professional behavior to protect clients and the integrity of the investment profession.
They establish the ethical framework for CFA charterholders.
10. Standard IV(A) Loyalty requires members to:
A) Always prioritize their employer over clients
B) Act in good faith and in the best interests of their employer
C) Seek personal gain from employer relationships
D) Only work for one employer at a time
Answer: B) Act in good faith and in the best interests of their employer
Rationale: Standard IV(A) requires members to act in good faith and in the best interests
of their employer. This includes not engaging in activities that harm the employer and
maintaining professional conduct.
11. A member's duty to maintain client confidentiality includes:
A) Sharing information with other clients for marketing purposes
B) Disclosing information only with client permission
C) Reporting client activities to regulators without consent
D) Discussing client cases with family members
Answer: B) Disclosing information only with client permission
Rationale: Standard III(E) Preservation of Confidentiality requires members to keep
client information confidential unless disclosure is required by law or the client provides
permission.
12. According to Standard I(D) Misconduct, members must:
A) Engage in any legal activity to benefit clients
B) Avoid any conduct involving dishonesty, fraud, or deceit
C) Only act in their own best interest
D) Report all client activities to employers
