CFA L1 – Ethics questions with answers.
Stakeholders ANS -Individuals or groups of individuals who may be affected either directly or indirectly
by a decision and thus have an interest, or stake, in the decision.
Ethics ANS -The study of moral principles or of making good choices. Ethics encompasses a set of moral
principles and rules of conduct that provide guidance for our behavior.
Moral Principles or Ethical Principles ANS -Beliefs regarding what is good, acceptable, or obligatory
behavior and what is bad, unacceptable, or forbidden behavior.
Code of Ethics ANS -An established guide that communicates an organization's values and overall
expectations regarding member behavior. A code of ethics serves as a general guide for how community
members should act.
standards of conduct ANS -Behaviors required by a group; established benchmarks that clarify or
enhance a group's code of ethics.
profession ANS -An occupational group that has specific education, expert knowledge, and a framework
of practice and behavior that underpins community trust, respect, and recognition.
The mission of CFA Institute ANS -"to lead the investment profession globally, by promoting the highest
standards of ethics, education, and professional excellence for the ultimate benefit of society."
B is correct. Investment professionals have a special responsibility because clients entrust them to
protect the clients' assets. ANS -Which of the following statements is most accurate? Investment
professionals have a special responsibility to act ethically because:
A. the industry is heavily regulated.
B. they are entrusted to protect clients' assets.
,C. the profession requires compliance with its code of ethics.
A is correct. Professionals use specialized knowledge and skills in service to others. Their career and
employer may benefit, but those results are not the primary focus of a professional's use of his or her
specialized knowledge and skills. ANS -Which of the following statements best completes the following
sentence? Professionals use their specialized knowledge and skills:
A. in service to others.
B. to advance their career.
C. for the exclusive benefit of their employers.
C is correct. A profession's code of ethics publicly communicates the shared principles and expected
behaviors of a profession's members. The existence of a code of ethics does not ensure that all
members will behave in a manner consistent with the code and act ethically at all times. A profession
will often establish a disciplinary process to address alleged violations of the code of ethics. A profession
may adopt standards of conduct to enhance and clarify the code of ethics. ANS -Which of the following
statements is most accurate? A profession's code of ethics:
A. includes standards of conduct or specific benchmarks for behavior.
B. ensures that all members of a profession will act ethically at all times.
C. publicly communicates the shared principles and expected behaviors of a profession's members.
B is correct. A profession is practiced by members who share and agree to adhere to a common code of
ethics, and a profession is based on a specialized knowledge and skills and service to others. ANS -A
profession is most likely described as a group of people that:
A. has a common level of basic knowledge about a particular subject.
, B. monitors its members based on an agreed-on code of ethics.
C. puts the interests of its members first.
B is correct. Addressing past ethical failings is not a goal of the CFA Institute Code of Ethics. Fostering
public confidence and publicly communicating established principles are both goals of the CFA Institute
Code of Ethics. ANS -The goals of the CFA Institute Code of Ethics would least likely include:
A. publicly communicating established principles.
B. addressing past ethical failings.
C. fostering public confidence.
A is correct. The CFA Institute Code of Ethics and Standards of Professional Conduct are designed to
foster and reinforce a culture of responsibility and professionalism. The Code and Standards apply to all
members and candidates regardless of title, position, occupation, geographic location, or specific
situation, and they apply to all professional activities of investment professionals. ANS -The CFA
Institute Code of Ethics and Standards of Professional Conduct are most likely designed to foster and
reinforce a culture of:
A. responsibility and professionalism.
B. regulatory compliance.
C. service to the firm.
B is correct. For the investment fund manager to claim he is part of a profession, the activity must be
based on specialized knowledge and skills, must include service to others, and must be practiced by
members who share and agree to adhere to a common code of ethics. Investment management is based
on providing service to a firm's clients and also requires specialized knowledge and skills, but it would
not be considered a profession unless there exists a common code of ethics among similar investment
Stakeholders ANS -Individuals or groups of individuals who may be affected either directly or indirectly
by a decision and thus have an interest, or stake, in the decision.
Ethics ANS -The study of moral principles or of making good choices. Ethics encompasses a set of moral
principles and rules of conduct that provide guidance for our behavior.
Moral Principles or Ethical Principles ANS -Beliefs regarding what is good, acceptable, or obligatory
behavior and what is bad, unacceptable, or forbidden behavior.
Code of Ethics ANS -An established guide that communicates an organization's values and overall
expectations regarding member behavior. A code of ethics serves as a general guide for how community
members should act.
standards of conduct ANS -Behaviors required by a group; established benchmarks that clarify or
enhance a group's code of ethics.
profession ANS -An occupational group that has specific education, expert knowledge, and a framework
of practice and behavior that underpins community trust, respect, and recognition.
The mission of CFA Institute ANS -"to lead the investment profession globally, by promoting the highest
standards of ethics, education, and professional excellence for the ultimate benefit of society."
B is correct. Investment professionals have a special responsibility because clients entrust them to
protect the clients' assets. ANS -Which of the following statements is most accurate? Investment
professionals have a special responsibility to act ethically because:
A. the industry is heavily regulated.
B. they are entrusted to protect clients' assets.
,C. the profession requires compliance with its code of ethics.
A is correct. Professionals use specialized knowledge and skills in service to others. Their career and
employer may benefit, but those results are not the primary focus of a professional's use of his or her
specialized knowledge and skills. ANS -Which of the following statements best completes the following
sentence? Professionals use their specialized knowledge and skills:
A. in service to others.
B. to advance their career.
C. for the exclusive benefit of their employers.
C is correct. A profession's code of ethics publicly communicates the shared principles and expected
behaviors of a profession's members. The existence of a code of ethics does not ensure that all
members will behave in a manner consistent with the code and act ethically at all times. A profession
will often establish a disciplinary process to address alleged violations of the code of ethics. A profession
may adopt standards of conduct to enhance and clarify the code of ethics. ANS -Which of the following
statements is most accurate? A profession's code of ethics:
A. includes standards of conduct or specific benchmarks for behavior.
B. ensures that all members of a profession will act ethically at all times.
C. publicly communicates the shared principles and expected behaviors of a profession's members.
B is correct. A profession is practiced by members who share and agree to adhere to a common code of
ethics, and a profession is based on a specialized knowledge and skills and service to others. ANS -A
profession is most likely described as a group of people that:
A. has a common level of basic knowledge about a particular subject.
, B. monitors its members based on an agreed-on code of ethics.
C. puts the interests of its members first.
B is correct. Addressing past ethical failings is not a goal of the CFA Institute Code of Ethics. Fostering
public confidence and publicly communicating established principles are both goals of the CFA Institute
Code of Ethics. ANS -The goals of the CFA Institute Code of Ethics would least likely include:
A. publicly communicating established principles.
B. addressing past ethical failings.
C. fostering public confidence.
A is correct. The CFA Institute Code of Ethics and Standards of Professional Conduct are designed to
foster and reinforce a culture of responsibility and professionalism. The Code and Standards apply to all
members and candidates regardless of title, position, occupation, geographic location, or specific
situation, and they apply to all professional activities of investment professionals. ANS -The CFA
Institute Code of Ethics and Standards of Professional Conduct are most likely designed to foster and
reinforce a culture of:
A. responsibility and professionalism.
B. regulatory compliance.
C. service to the firm.
B is correct. For the investment fund manager to claim he is part of a profession, the activity must be
based on specialized knowledge and skills, must include service to others, and must be practiced by
members who share and agree to adhere to a common code of ethics. Investment management is based
on providing service to a firm's clients and also requires specialized knowledge and skills, but it would
not be considered a profession unless there exists a common code of ethics among similar investment
