Certified Investment Management Analyst (CIMA) Practice Exam
Question 1: Which of the following best represents a core ethical principle in investment
management?
A) Maximizing short‐term gains at any cost
B) Maintaining confidentiality, integrity, and client interests
C) Disclosing all proprietary strategies publicly
D) Prioritizing personal profit over client welfare
Answer: B
Explanation: Investment management ethics emphasizes maintaining confidentiality, integrity,
and always placing client interests at the forefront.
Question 2: The CIMA Code of Professional Responsibility primarily focuses on which
aspect of professional conduct?
A) Aggressive marketing strategies
B) Prioritizing firm profitability
C) Conflicts of interest and duty of loyalty
D) Rapid decision-making in volatile markets
Answer: C
Explanation: The CIMA Code of Professional Responsibility emphasizes managing conflicts of
interest and ensuring a duty of loyalty to clients.
Question 3: Global Investment Performance Standards (GIPS) are important because they:
A) Guarantee market-beating returns
B) Provide uniform standards for performance reporting and evaluation
C) Mandate the use of specific asset classes
D) Limit investment choices based on geography
Answer: B
Explanation: GIPS ensure that performance reporting is standardized, transparent, and
comparable across investment firms.
Question 4: Which responsibility is most closely related to the concept of fiduciary duty?
A) Promoting aggressive trading strategies
B) Balancing client interests with regulatory compliance
C) Ensuring loyalty, care, and prudence in managing client assets
D) Prioritizing firm reputation over client outcomes
Answer: C
Explanation: Fiduciary duty involves acting with loyalty, care, and prudence when managing
client assets, which is central to investment management ethics.
Question 5: Which of the following scenarios best illustrates a breach of ethical standards
in investment management?
A) Fully disclosing potential conflicts of interest to clients
B) Implementing a strict confidentiality policy regarding client data
,C) Accepting personal benefits from a company whose securities are recommended to clients
without disclosure
D) Following established protocols to ensure transparency
Answer: C
Explanation: Accepting undisclosed personal benefits creates a conflict of interest and breaches
the ethical standards expected of investment professionals.
Question 6: In the context of ethical standards, why is transparency critical in investment
management?
A) It allows for faster transactions
B) It ensures that clients can verify that conflicts of interest are managed appropriately
C) It simplifies complex financial instruments
D) It increases the speed of decision-making
Answer: B
Explanation: Transparency enables clients to understand how conflicts of interest are managed,
ensuring trust and integrity in investment management.
Question 7: Which of the following best describes the duty of loyalty in fiduciary
responsibility?
A) Acting in a way that benefits the investment firm first
B) Prioritizing personal financial goals over client outcomes
C) Ensuring that client interests always come before personal or firm interests
D) Encouraging clients to take excessive risks
Answer: C
Explanation: The duty of loyalty requires that investment professionals consistently prioritize the
interests of their clients over their own or their firm’s.
Question 8: Which action is most consistent with ethical professional standards when a
potential conflict of interest arises?
A) Hiding the conflict to avoid losing clients
B) Fully disclosing the conflict and seeking client consent
C) Ignoring the conflict since it may be beneficial
D) Transferring the responsibility to a third party without informing the client
Answer: B
Explanation: Ethical standards require that conflicts of interest be disclosed fully and managed
transparently with client consent.
Question 9: The principle of integrity in investment management primarily requires that
professionals:
A) Exploit market opportunities regardless of client risk profiles
B) Adhere to ethical standards even when not under regulatory oversight
C) Share all internal research with competitors
D) Focus exclusively on short-term performance
Answer: B
Explanation: Integrity demands that professionals consistently follow ethical standards and
behave honestly, regardless of external pressures.
,Question 10: An investment manager following the CIMA Code of Professional
Responsibility would most likely:
A) Conceal information that might alarm clients
B) Ensure that all recommendations are free from personal bias
C) Base decisions solely on market trends
D) Prioritize commission-based products
Answer: B
Explanation: Adhering to the code means that recommendations are made objectively and
without personal bias, focusing on the best interests of the client.
Question 11: Which of the following is a key element of ethical standards in investment
management?
A) Market timing for maximum profit
B) Commitment to continuous professional development and ethical practice
C) Exclusive reliance on historical performance data
D) Guaranteeing returns through proprietary strategies
Answer: B
Explanation: Continuous professional development and adherence to ethical practices are
essential for maintaining high standards in investment management.
Question 12: What is the primary goal of Global Investment Performance Standards
(GIPS)?
A) To regulate insider trading
B) To provide a standardized framework for performance measurement and reporting
C) To limit the range of available investment strategies
D) To enforce strict pricing on investment products
Answer: B
Explanation: GIPS are designed to offer a consistent framework for performance measurement,
making comparisons among firms more reliable.
Question 13: In fiduciary responsibility, what does “prudence” mean?
A) Making decisions quickly without much analysis
B) Exercising caution and thorough analysis before making investment decisions
C) Relying solely on market predictions
D) Delegating decisions to automated systems
Answer: B
Explanation: Prudence in fiduciary duty means being cautious and analytical in decision-making
to protect client interests.
Question 14: Which of the following best reflects a professional’s responsibility when
handling client funds?
A) Investing without client input to maximize efficiency
B) Using client funds for personal investment opportunities
C) Managing assets with due care and in accordance with client objectives
D) Prioritizing high-risk investments to achieve higher returns
Answer: C
, Explanation: Professionals must manage client funds with care and always align investment
decisions with the client’s objectives and risk tolerance.
Question 15: How do ethical and professional standards affect the reputation of the
investment management industry?
A) They have little impact on market performance
B) They build trust and confidence among investors and the public
C) They solely benefit regulatory agencies
D) They primarily serve as internal guidelines with no external relevance
Answer: B
Explanation: Ethical and professional standards foster trust and credibility, which are critical for
maintaining a strong reputation in the industry.
Question 16: A violation of which ethical principle might result in a loss of client trust and
potential legal consequences?
A) Confidentiality
B) Timeliness of trade execution
C) Market research accuracy
D) Investment diversification
Answer: A
Explanation: Breaching confidentiality is a serious ethical violation that can damage trust and
lead to legal issues.
Question 17: When managing potential conflicts of interest, the best practice is to:
A) Conceal the conflict to avoid client concerns
B) Fully disclose the conflict and take steps to mitigate it
C) Ignore the conflict if it appears minor
D) Delegate the decision to another firm
Answer: B
Explanation: Full disclosure and proactive management of conflicts of interest are essential to
maintain ethical standards and client trust.
Question 18: What does “client-centric” mean in the context of ethical investment
management?
A) Focusing on maximizing firm profits
B) Tailoring investment strategies based on the individual needs and objectives of clients
C) Using standardized strategies for all clients
D) Prioritizing high-commission products
Answer: B
Explanation: A client-centric approach involves customizing strategies to meet each client’s
unique goals and risk tolerances.
Question 19: In ethical decision-making, why is it important to avoid even the appearance
of impropriety?
A) It minimizes media attention
B) It helps in maintaining public trust and upholding professional reputation
Question 1: Which of the following best represents a core ethical principle in investment
management?
A) Maximizing short‐term gains at any cost
B) Maintaining confidentiality, integrity, and client interests
C) Disclosing all proprietary strategies publicly
D) Prioritizing personal profit over client welfare
Answer: B
Explanation: Investment management ethics emphasizes maintaining confidentiality, integrity,
and always placing client interests at the forefront.
Question 2: The CIMA Code of Professional Responsibility primarily focuses on which
aspect of professional conduct?
A) Aggressive marketing strategies
B) Prioritizing firm profitability
C) Conflicts of interest and duty of loyalty
D) Rapid decision-making in volatile markets
Answer: C
Explanation: The CIMA Code of Professional Responsibility emphasizes managing conflicts of
interest and ensuring a duty of loyalty to clients.
Question 3: Global Investment Performance Standards (GIPS) are important because they:
A) Guarantee market-beating returns
B) Provide uniform standards for performance reporting and evaluation
C) Mandate the use of specific asset classes
D) Limit investment choices based on geography
Answer: B
Explanation: GIPS ensure that performance reporting is standardized, transparent, and
comparable across investment firms.
Question 4: Which responsibility is most closely related to the concept of fiduciary duty?
A) Promoting aggressive trading strategies
B) Balancing client interests with regulatory compliance
C) Ensuring loyalty, care, and prudence in managing client assets
D) Prioritizing firm reputation over client outcomes
Answer: C
Explanation: Fiduciary duty involves acting with loyalty, care, and prudence when managing
client assets, which is central to investment management ethics.
Question 5: Which of the following scenarios best illustrates a breach of ethical standards
in investment management?
A) Fully disclosing potential conflicts of interest to clients
B) Implementing a strict confidentiality policy regarding client data
,C) Accepting personal benefits from a company whose securities are recommended to clients
without disclosure
D) Following established protocols to ensure transparency
Answer: C
Explanation: Accepting undisclosed personal benefits creates a conflict of interest and breaches
the ethical standards expected of investment professionals.
Question 6: In the context of ethical standards, why is transparency critical in investment
management?
A) It allows for faster transactions
B) It ensures that clients can verify that conflicts of interest are managed appropriately
C) It simplifies complex financial instruments
D) It increases the speed of decision-making
Answer: B
Explanation: Transparency enables clients to understand how conflicts of interest are managed,
ensuring trust and integrity in investment management.
Question 7: Which of the following best describes the duty of loyalty in fiduciary
responsibility?
A) Acting in a way that benefits the investment firm first
B) Prioritizing personal financial goals over client outcomes
C) Ensuring that client interests always come before personal or firm interests
D) Encouraging clients to take excessive risks
Answer: C
Explanation: The duty of loyalty requires that investment professionals consistently prioritize the
interests of their clients over their own or their firm’s.
Question 8: Which action is most consistent with ethical professional standards when a
potential conflict of interest arises?
A) Hiding the conflict to avoid losing clients
B) Fully disclosing the conflict and seeking client consent
C) Ignoring the conflict since it may be beneficial
D) Transferring the responsibility to a third party without informing the client
Answer: B
Explanation: Ethical standards require that conflicts of interest be disclosed fully and managed
transparently with client consent.
Question 9: The principle of integrity in investment management primarily requires that
professionals:
A) Exploit market opportunities regardless of client risk profiles
B) Adhere to ethical standards even when not under regulatory oversight
C) Share all internal research with competitors
D) Focus exclusively on short-term performance
Answer: B
Explanation: Integrity demands that professionals consistently follow ethical standards and
behave honestly, regardless of external pressures.
,Question 10: An investment manager following the CIMA Code of Professional
Responsibility would most likely:
A) Conceal information that might alarm clients
B) Ensure that all recommendations are free from personal bias
C) Base decisions solely on market trends
D) Prioritize commission-based products
Answer: B
Explanation: Adhering to the code means that recommendations are made objectively and
without personal bias, focusing on the best interests of the client.
Question 11: Which of the following is a key element of ethical standards in investment
management?
A) Market timing for maximum profit
B) Commitment to continuous professional development and ethical practice
C) Exclusive reliance on historical performance data
D) Guaranteeing returns through proprietary strategies
Answer: B
Explanation: Continuous professional development and adherence to ethical practices are
essential for maintaining high standards in investment management.
Question 12: What is the primary goal of Global Investment Performance Standards
(GIPS)?
A) To regulate insider trading
B) To provide a standardized framework for performance measurement and reporting
C) To limit the range of available investment strategies
D) To enforce strict pricing on investment products
Answer: B
Explanation: GIPS are designed to offer a consistent framework for performance measurement,
making comparisons among firms more reliable.
Question 13: In fiduciary responsibility, what does “prudence” mean?
A) Making decisions quickly without much analysis
B) Exercising caution and thorough analysis before making investment decisions
C) Relying solely on market predictions
D) Delegating decisions to automated systems
Answer: B
Explanation: Prudence in fiduciary duty means being cautious and analytical in decision-making
to protect client interests.
Question 14: Which of the following best reflects a professional’s responsibility when
handling client funds?
A) Investing without client input to maximize efficiency
B) Using client funds for personal investment opportunities
C) Managing assets with due care and in accordance with client objectives
D) Prioritizing high-risk investments to achieve higher returns
Answer: C
, Explanation: Professionals must manage client funds with care and always align investment
decisions with the client’s objectives and risk tolerance.
Question 15: How do ethical and professional standards affect the reputation of the
investment management industry?
A) They have little impact on market performance
B) They build trust and confidence among investors and the public
C) They solely benefit regulatory agencies
D) They primarily serve as internal guidelines with no external relevance
Answer: B
Explanation: Ethical and professional standards foster trust and credibility, which are critical for
maintaining a strong reputation in the industry.
Question 16: A violation of which ethical principle might result in a loss of client trust and
potential legal consequences?
A) Confidentiality
B) Timeliness of trade execution
C) Market research accuracy
D) Investment diversification
Answer: A
Explanation: Breaching confidentiality is a serious ethical violation that can damage trust and
lead to legal issues.
Question 17: When managing potential conflicts of interest, the best practice is to:
A) Conceal the conflict to avoid client concerns
B) Fully disclose the conflict and take steps to mitigate it
C) Ignore the conflict if it appears minor
D) Delegate the decision to another firm
Answer: B
Explanation: Full disclosure and proactive management of conflicts of interest are essential to
maintain ethical standards and client trust.
Question 18: What does “client-centric” mean in the context of ethical investment
management?
A) Focusing on maximizing firm profits
B) Tailoring investment strategies based on the individual needs and objectives of clients
C) Using standardized strategies for all clients
D) Prioritizing high-commission products
Answer: B
Explanation: A client-centric approach involves customizing strategies to meet each client’s
unique goals and risk tolerances.
Question 19: In ethical decision-making, why is it important to avoid even the appearance
of impropriety?
A) It minimizes media attention
B) It helps in maintaining public trust and upholding professional reputation
