CANNON TRUST SCHOOL III ACTUAL EXAM
2025/2026 Questions 1-200 | Verified Answers with
Detailed Rationales
Secure your Certified Trust and Fiduciary Advisor (CTFA) designation on the first
attempt with this complete practice bank containing questions 1 through 200 for the
Cannon Trust School III actual exam. This comprehensive preparation guide features
100% verified answers and detailed legal and financial rationales covering advanced
estate planning, trust administration, fiduciary law, and asset management strategies. It
is an indispensable study tool for wealth managers, trust officers, and financial planners
looking to clear this elite industry milestone with top marks.
Question 1
All of the following are considered fiduciaries under OCC Regulation 9, EXCEPT:
A) Trustee
B) Executor/Personal Representative
C) Investment advisor in an agency account
D) Custodian with no investment discretion
Correct Answer: D
Rationale: Under OCC Regulation 9, a custodian with no investment discretion is not
considered a fiduciary. The regulation specifically defines fiduciaries as those with
discretionary authority over assets. Trustees, executors/personal representatives, and
investment advisors in agency accounts all exercise fiduciary responsibilities. A custodian
without investment discretion simply holds assets for safekeeping without making
decisions .
,Question 2
Your bank is sole trustee of a credit shelter trust. The trust portfolio is invested in a
diversified portfolio of domestic stocks and bonds. The current beneficiary requests that
the trustee delegate a portion of its investment management responsibility to a
recognized third-party advisor who specializes in international investing. The trust is
governed by a state recognizing the Prudent Investor Rule. The trustee should:
A) Decline the request as an impermissible delegation of its trust powers
B) Agree to the request subject to the review and approval of its risk management
committee
C) Agree to the request so long as it obtains authorization and indemnification from all
beneficiaries and reconfirm on an annual basis
D) Agree to the request if satisfied that delegation will promote investment
diversification, and monitor the investment advisor's activities and performance
Correct Answer: D
Rationale: Under the Prudent Investor Rule, a trustee may delegate investment
responsibilities if the delegation promotes investment diversification and the trustee
monitors the advisor's activities and performance. The Uniform Prudent Investor Act
specifically permits delegation of investment functions. The trustee must exercise
reasonable care, skill, and caution in selecting the agent and must periodically review the
agent's performance .
Question 3
Your client used your firm's standard trust document. He requests that you draft an
amendment to the document. You should:
A) Refer him to several qualified estate planning attorneys
B) Refer him to his accountant before you draft the amendment
C) Draft the amendment and have your firm's counsel review it
D) Draft the amendment using your firm's will manual as a template
Correct Answer: A
,Rationale: Trust officers are not licensed to practice law and should not draft
amendments to trust documents. The proper course is to refer the client to qualified estate
planning attorneys who can provide legal advice. Drafting documents or providing legal
advice could constitute the unauthorized practice of law .
Question 4
Chris Jones is a trust officer with ABC Bank and Trust. Chris just received a phone call
from his old roommate, Fred Jones. Fred works for XYZ Company, an engineering
company. Fred told Chris that his company has just developed a new product that will
revolutionize its industry. The company has decided not to announce the product until
the product is patented. Chris purchases shares in his own name and also invests a large
amount of trust monies for his two largest trust accounts. Which statement is correct?
A) Fred has violated Rule 10b-5, but Chris has not
B) Chris has not violated 10b-5 because Chris is not an insider
C) Chris and Fred have not violated 10b-5, but they may have violated 16b depending
on the timing of their trades
D) Chris and Fred have violated Rule 10b-5 by trading on nonpublic information
Correct Answer: D
Rationale: Both Chris and Fred have violated Rule 10b-5 by trading on material
nonpublic information. Fred, as an employee of the company with insider knowledge,
provided confidential information to Chris, who used it to trade personally and for trust
accounts. Trading on material nonpublic information constitutes insider trading. Chris
violated his fiduciary duty by using confidential information for trust accounts .
Question 5
A Trust Department Manager is standing in a lunch line at a crowded restaurant with a
Trust Officer. They are surrounded by individuals who are not bank employees. The trust
officer receives an email on his smartphone and loudly says "Yes! We just closed the
Miller account, a funded irrevocable trust with a $50,000 fee. That's fantastic, lunch is on
, me!" Which of the following is the MOST appropriate response for the Trust Department
Manager?
A) Ask how you can be of assistance in the opening of the account
B) Publicly berate the Trust Officer for a breach of confidentiality
C) Privately discuss with the Trust Officer that this may have been a breach of
confidentiality
D) Offer congratulations and accept their offer to buy lunch
Correct Answer: C
Rationale: The Trust Officer breached confidentiality by disclosing confidential client
information in a public setting. The most appropriate response is to privately discuss the
breach with the Trust Officer. Publicly berating would be unprofessional and could create
additional liability. A private discussion allows for education on confidentiality standards .
Question 6
Each of the following is a valid defense to a charge of Self Dealing by a Trustee, except
one. Which of the following is NOT a valid defense for the Trustee?
A) The Trust Administration Committee approved the action
B) A specific exculpatory provision is in the instrument permitting the action
C) The written consent of each of the beneficiaries, after being fully informed of all
material information
D) An order from the court with approval of the Trustee's action
Correct Answer: A
Rationale: The Trust Administration Committee's approval is not a valid defense to self-
dealing. Committee approval does not eliminate the conflict of interest. Valid defenses
include: an exculpatory provision in the trust instrument; written consent of all
beneficiaries after full disclosure; and court approval of the transaction .
2025/2026 Questions 1-200 | Verified Answers with
Detailed Rationales
Secure your Certified Trust and Fiduciary Advisor (CTFA) designation on the first
attempt with this complete practice bank containing questions 1 through 200 for the
Cannon Trust School III actual exam. This comprehensive preparation guide features
100% verified answers and detailed legal and financial rationales covering advanced
estate planning, trust administration, fiduciary law, and asset management strategies. It
is an indispensable study tool for wealth managers, trust officers, and financial planners
looking to clear this elite industry milestone with top marks.
Question 1
All of the following are considered fiduciaries under OCC Regulation 9, EXCEPT:
A) Trustee
B) Executor/Personal Representative
C) Investment advisor in an agency account
D) Custodian with no investment discretion
Correct Answer: D
Rationale: Under OCC Regulation 9, a custodian with no investment discretion is not
considered a fiduciary. The regulation specifically defines fiduciaries as those with
discretionary authority over assets. Trustees, executors/personal representatives, and
investment advisors in agency accounts all exercise fiduciary responsibilities. A custodian
without investment discretion simply holds assets for safekeeping without making
decisions .
,Question 2
Your bank is sole trustee of a credit shelter trust. The trust portfolio is invested in a
diversified portfolio of domestic stocks and bonds. The current beneficiary requests that
the trustee delegate a portion of its investment management responsibility to a
recognized third-party advisor who specializes in international investing. The trust is
governed by a state recognizing the Prudent Investor Rule. The trustee should:
A) Decline the request as an impermissible delegation of its trust powers
B) Agree to the request subject to the review and approval of its risk management
committee
C) Agree to the request so long as it obtains authorization and indemnification from all
beneficiaries and reconfirm on an annual basis
D) Agree to the request if satisfied that delegation will promote investment
diversification, and monitor the investment advisor's activities and performance
Correct Answer: D
Rationale: Under the Prudent Investor Rule, a trustee may delegate investment
responsibilities if the delegation promotes investment diversification and the trustee
monitors the advisor's activities and performance. The Uniform Prudent Investor Act
specifically permits delegation of investment functions. The trustee must exercise
reasonable care, skill, and caution in selecting the agent and must periodically review the
agent's performance .
Question 3
Your client used your firm's standard trust document. He requests that you draft an
amendment to the document. You should:
A) Refer him to several qualified estate planning attorneys
B) Refer him to his accountant before you draft the amendment
C) Draft the amendment and have your firm's counsel review it
D) Draft the amendment using your firm's will manual as a template
Correct Answer: A
,Rationale: Trust officers are not licensed to practice law and should not draft
amendments to trust documents. The proper course is to refer the client to qualified estate
planning attorneys who can provide legal advice. Drafting documents or providing legal
advice could constitute the unauthorized practice of law .
Question 4
Chris Jones is a trust officer with ABC Bank and Trust. Chris just received a phone call
from his old roommate, Fred Jones. Fred works for XYZ Company, an engineering
company. Fred told Chris that his company has just developed a new product that will
revolutionize its industry. The company has decided not to announce the product until
the product is patented. Chris purchases shares in his own name and also invests a large
amount of trust monies for his two largest trust accounts. Which statement is correct?
A) Fred has violated Rule 10b-5, but Chris has not
B) Chris has not violated 10b-5 because Chris is not an insider
C) Chris and Fred have not violated 10b-5, but they may have violated 16b depending
on the timing of their trades
D) Chris and Fred have violated Rule 10b-5 by trading on nonpublic information
Correct Answer: D
Rationale: Both Chris and Fred have violated Rule 10b-5 by trading on material
nonpublic information. Fred, as an employee of the company with insider knowledge,
provided confidential information to Chris, who used it to trade personally and for trust
accounts. Trading on material nonpublic information constitutes insider trading. Chris
violated his fiduciary duty by using confidential information for trust accounts .
Question 5
A Trust Department Manager is standing in a lunch line at a crowded restaurant with a
Trust Officer. They are surrounded by individuals who are not bank employees. The trust
officer receives an email on his smartphone and loudly says "Yes! We just closed the
Miller account, a funded irrevocable trust with a $50,000 fee. That's fantastic, lunch is on
, me!" Which of the following is the MOST appropriate response for the Trust Department
Manager?
A) Ask how you can be of assistance in the opening of the account
B) Publicly berate the Trust Officer for a breach of confidentiality
C) Privately discuss with the Trust Officer that this may have been a breach of
confidentiality
D) Offer congratulations and accept their offer to buy lunch
Correct Answer: C
Rationale: The Trust Officer breached confidentiality by disclosing confidential client
information in a public setting. The most appropriate response is to privately discuss the
breach with the Trust Officer. Publicly berating would be unprofessional and could create
additional liability. A private discussion allows for education on confidentiality standards .
Question 6
Each of the following is a valid defense to a charge of Self Dealing by a Trustee, except
one. Which of the following is NOT a valid defense for the Trustee?
A) The Trust Administration Committee approved the action
B) A specific exculpatory provision is in the instrument permitting the action
C) The written consent of each of the beneficiaries, after being fully informed of all
material information
D) An order from the court with approval of the Trustee's action
Correct Answer: A
Rationale: The Trust Administration Committee's approval is not a valid defense to self-
dealing. Committee approval does not eliminate the conflict of interest. Valid defenses
include: an exculpatory provision in the trust instrument; written consent of all
beneficiaries after full disclosure; and court approval of the transaction .
