CAIA LEVEL 1 COMPREHENSIVE EXAM 2025/2026
QUESTIONS WITH ANSWERS TAGGED A+
✔✔Duties to Employers - ✔✔1. Loyalty
2. Additional Compensation Arrangements
3. Responsibilities of Supervisors
✔✔Loyalty - ✔✔Members and Candidates must act for the benefit of their employer and
not deprive their employer of the advantage of their skills and abilities, divulge
confidential information, or otherwise cause harm to their employer
✔✔Additional Compensation Arrangements - ✔✔Members and Candidates must not
accept gifts, benefits, compensation, or consideration that competes with or might
reasonably be expected to create a conflict of interest with their employer's interest
unless they obtain written consent from all parties involved.
✔✔Responsibilities of Supervisors - ✔✔Members and Candidates must make
reasonable efforts to ensure that anyone subject to their supervision or authority
complies with applicable laws, rules, regulations, and the Code and Standards.
✔✔Investment Analysis, Recommendation, and Actions - ✔✔1. Diligence and
Reasonable Basis
2. Communication with Clients and Prospective Clients
3. Record Retention
✔✔Diligence and Reasonable Basis - ✔✔Members and Candidates must:
1. Exercise diligence, independence, and thoroughness in analyzing investments,
making investment recommendations, and taking investment actions.
2. Have a reasonable and adequate basis, supported by appropriate research and
investigation, for any investment analysis, recommendation, or action.
✔✔Communication with Clients and Prospective Clients - ✔✔Members and Candidates
must:
1. Disclose to clients and prospective clients the basic format and general principles of
the investment processes they use to analyze investments, select securities, and
construct portfolios and must promptly disclose any changes that might materially affect
those processes.
2. Disclose to clients and prospective clients significant limitations and risks associated
with the investment process.
3. Use reasonable judgment in identifying which factors are important to their
investment analyses, recommendations, or actions and include those factors in
communications with clients and prospective clients.
,4. Distinguish between fact and opinion in the presentation of investment analysis and
recommendations.
✔✔Record Retention - ✔✔Members and Candidates must develop and maintain
appropriate records to support their investment analyses, recommendations, actions,
and other investment-related communications with clients and prospective clients.
✔✔Conflicts of Interest - ✔✔1. Disclosure of Conflicts
2. Priority of Transactions
3. Referral Fees
✔✔Disclosure of Conflicts - ✔✔Members and Candidates must make full and fair
disclosure of all matters that could reasonably be expected to impair their independence
and objectivity or interfere with respective duties to their clients, prospective clients, and
employer. Members and Candidates must ensure that such disclosures are prominent,
are delivered in plain language, and communicate the relevant information effectively.
✔✔Priority of Transactions - ✔✔Investment transactions for clients and employers must
have priority over investment transactions in which a Member or Candidate is the
beneficial owner.
✔✔Referral Fees - ✔✔Members and candidates must disclose to employers and to
affected clients, before entering into any formal agreement for services, any benefits
received for the recommendation of services provided by the member.
✔✔Guidance - Standards vs. Local Law - ✔✔Members must know the laws and
regulations relating to their professional activities in all countries in which they conduct
business. Members must comply with applicable laws and regulations relating to their
professional activity. *Adhere to the most strict rules and requirements that apply
✔✔Guidance - Participating or Association with Violation by Others - ✔✔Members
should disassociate from any ongoing client, employer, or employee activity that is
illegal or unethical. While a member may first confront the involved individual, he must
approach his supervisor or compliance department. Inaction may be construed as
knowing participation
✔✔Recommended Procedures for Compliance - Members - ✔✔(Amongst Others)
-Members should have procedures to keep up with changes in applicable laws, rules,
and regulations
-Compliance procedures should be reviewed on an ongoing basis to ensure that they
abide by current laws
✔✔Recommended Procedures for Compliance - Firms - ✔✔1. Develop code of ethics
,2. Make available to employees information that highlights applicable laws and
regulations
3. Establish written procedures for reporting suspected violations of laws, regulations, or
company policies
✔✔Recommended Procedures for Compliance - ✔✔-protect the integrity of opinions
and make sure they're unbiased
-create a restricted list and distribute only factual info about companies on the list
-restrict special cost arrangements - pay for one's own commercial transportation and
hotel
-limit gifts - as long as it's not to influence a member's professional independence or
objectivity
-restrict employee investments in equity IPOs and private placements
-review procedures
-firms should have formal written policies on independence and objectivity of research
-firms should appoint a compliance officer and provide clear procedures for employee
reporting of unethical behavior and violations of applicable regulations
✔✔Standard I(B) - ✔✔Independence and Objectivity
✔✔Example: A money manager receives a gift of significant value from a client as a
reward for good performance over the prior period and informs her employer of the gift -
✔✔No violation here bc the gift is from a client and is not based on performance going
forward, but the gift must be disclosed to her employer. If the gift were contingent on
future performance, the money manager would have to obtain permission from her
employer
✔✔A member who is a performance analyst notices that one of her firm's top
investment managers has changed his composite consutrction, removing a poorly
performing large account and placing it in a different composite. The member does not
disclose this change in her performance report - ✔✔The member violated Standard I(B)
by failing to exercise independence and objectivity in her analysis. Altering composites
to conceal poor performance also violates Standard III(D) Performance Presentation
and may violate Standard I(C) Misrepresentations
✔✔I(C) Misrepresentation - ✔✔Members and Candidates must not knowingly make any
misrepresentations relating to investment analysis, recommendations, actions, or other
professional activities.
Prohibits statements of assurances or guarantees regarding an investment.
✔✔Misrepresentation - ✔✔Trust is a foundation in the investment profession. Do not
make any misrepresentations or give false impressions. Knowingly omitting information
that could affect an investment decision is considered misrepresentation. A report
, written by another analyst employed by the firm cannot be released as another analyst's
work.
✔✔Standard VI(A) - ✔✔Disclosure of Conflicts
✔✔I(D) Misconduct - ✔✔Members and Candidates must not engage in any professional
conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely
on their professional reputation, integrity, or competence.
✔✔Recommended Procedures for Compliance - Misconduct - ✔✔Firms are encouraged
to adopt these policies and procedures:
-develop and adopt a code of ethics and make clear that unethical behavior will not be
tolerated
-give employees a list of potential violations and sanctions, including dismissal
-check references of potential employees
✔✔Standard II(A) Material Nonpublic Information - ✔✔Members and Candidates who
possess material nonpublic information that could affect the value of an investment
must not act or cause others to act on the information.
✔✔Material Information - ✔✔Information is material if its disclosure would impact the
price of a security or if reasonable investors would want the information before making
an investment decision
✔✔Mosaic Theory - ✔✔There is no violation when a perceptive analyst reaches an
investment conclusion about a corporate action or event through an analysis of public
information together with items of nonmaterial nonpublic information
✔✔Guidance - Social Media - ✔✔When gathering info from internet or social media
sources, members and candidates need to be aware that not all of it is considered
public info. Members and candidates should confirm that any material information they
receive from these sources is also available from public sources, such as company
press releases or regulatory filings
✔✔Guidance - Industry experts - ✔✔Members and candidates may seek insight from
individuals who have specialized expertise in an industry. However, they may not act or
cause others to act on any material nonpublic information obtained from these experts
until that info has been publicly disseminated
✔✔Standard II(B) Market Manipulation - ✔✔Members and Candidates must not engage
in practices that distort prices or artificially inflate trading volume with the intent to
mislead market participants.
✔✔Guidance - Market Manipulation - ✔✔This standard applies to transactions that
deceive the market by distorting the price-setting mechanism of financial instruments or
QUESTIONS WITH ANSWERS TAGGED A+
✔✔Duties to Employers - ✔✔1. Loyalty
2. Additional Compensation Arrangements
3. Responsibilities of Supervisors
✔✔Loyalty - ✔✔Members and Candidates must act for the benefit of their employer and
not deprive their employer of the advantage of their skills and abilities, divulge
confidential information, or otherwise cause harm to their employer
✔✔Additional Compensation Arrangements - ✔✔Members and Candidates must not
accept gifts, benefits, compensation, or consideration that competes with or might
reasonably be expected to create a conflict of interest with their employer's interest
unless they obtain written consent from all parties involved.
✔✔Responsibilities of Supervisors - ✔✔Members and Candidates must make
reasonable efforts to ensure that anyone subject to their supervision or authority
complies with applicable laws, rules, regulations, and the Code and Standards.
✔✔Investment Analysis, Recommendation, and Actions - ✔✔1. Diligence and
Reasonable Basis
2. Communication with Clients and Prospective Clients
3. Record Retention
✔✔Diligence and Reasonable Basis - ✔✔Members and Candidates must:
1. Exercise diligence, independence, and thoroughness in analyzing investments,
making investment recommendations, and taking investment actions.
2. Have a reasonable and adequate basis, supported by appropriate research and
investigation, for any investment analysis, recommendation, or action.
✔✔Communication with Clients and Prospective Clients - ✔✔Members and Candidates
must:
1. Disclose to clients and prospective clients the basic format and general principles of
the investment processes they use to analyze investments, select securities, and
construct portfolios and must promptly disclose any changes that might materially affect
those processes.
2. Disclose to clients and prospective clients significant limitations and risks associated
with the investment process.
3. Use reasonable judgment in identifying which factors are important to their
investment analyses, recommendations, or actions and include those factors in
communications with clients and prospective clients.
,4. Distinguish between fact and opinion in the presentation of investment analysis and
recommendations.
✔✔Record Retention - ✔✔Members and Candidates must develop and maintain
appropriate records to support their investment analyses, recommendations, actions,
and other investment-related communications with clients and prospective clients.
✔✔Conflicts of Interest - ✔✔1. Disclosure of Conflicts
2. Priority of Transactions
3. Referral Fees
✔✔Disclosure of Conflicts - ✔✔Members and Candidates must make full and fair
disclosure of all matters that could reasonably be expected to impair their independence
and objectivity or interfere with respective duties to their clients, prospective clients, and
employer. Members and Candidates must ensure that such disclosures are prominent,
are delivered in plain language, and communicate the relevant information effectively.
✔✔Priority of Transactions - ✔✔Investment transactions for clients and employers must
have priority over investment transactions in which a Member or Candidate is the
beneficial owner.
✔✔Referral Fees - ✔✔Members and candidates must disclose to employers and to
affected clients, before entering into any formal agreement for services, any benefits
received for the recommendation of services provided by the member.
✔✔Guidance - Standards vs. Local Law - ✔✔Members must know the laws and
regulations relating to their professional activities in all countries in which they conduct
business. Members must comply with applicable laws and regulations relating to their
professional activity. *Adhere to the most strict rules and requirements that apply
✔✔Guidance - Participating or Association with Violation by Others - ✔✔Members
should disassociate from any ongoing client, employer, or employee activity that is
illegal or unethical. While a member may first confront the involved individual, he must
approach his supervisor or compliance department. Inaction may be construed as
knowing participation
✔✔Recommended Procedures for Compliance - Members - ✔✔(Amongst Others)
-Members should have procedures to keep up with changes in applicable laws, rules,
and regulations
-Compliance procedures should be reviewed on an ongoing basis to ensure that they
abide by current laws
✔✔Recommended Procedures for Compliance - Firms - ✔✔1. Develop code of ethics
,2. Make available to employees information that highlights applicable laws and
regulations
3. Establish written procedures for reporting suspected violations of laws, regulations, or
company policies
✔✔Recommended Procedures for Compliance - ✔✔-protect the integrity of opinions
and make sure they're unbiased
-create a restricted list and distribute only factual info about companies on the list
-restrict special cost arrangements - pay for one's own commercial transportation and
hotel
-limit gifts - as long as it's not to influence a member's professional independence or
objectivity
-restrict employee investments in equity IPOs and private placements
-review procedures
-firms should have formal written policies on independence and objectivity of research
-firms should appoint a compliance officer and provide clear procedures for employee
reporting of unethical behavior and violations of applicable regulations
✔✔Standard I(B) - ✔✔Independence and Objectivity
✔✔Example: A money manager receives a gift of significant value from a client as a
reward for good performance over the prior period and informs her employer of the gift -
✔✔No violation here bc the gift is from a client and is not based on performance going
forward, but the gift must be disclosed to her employer. If the gift were contingent on
future performance, the money manager would have to obtain permission from her
employer
✔✔A member who is a performance analyst notices that one of her firm's top
investment managers has changed his composite consutrction, removing a poorly
performing large account and placing it in a different composite. The member does not
disclose this change in her performance report - ✔✔The member violated Standard I(B)
by failing to exercise independence and objectivity in her analysis. Altering composites
to conceal poor performance also violates Standard III(D) Performance Presentation
and may violate Standard I(C) Misrepresentations
✔✔I(C) Misrepresentation - ✔✔Members and Candidates must not knowingly make any
misrepresentations relating to investment analysis, recommendations, actions, or other
professional activities.
Prohibits statements of assurances or guarantees regarding an investment.
✔✔Misrepresentation - ✔✔Trust is a foundation in the investment profession. Do not
make any misrepresentations or give false impressions. Knowingly omitting information
that could affect an investment decision is considered misrepresentation. A report
, written by another analyst employed by the firm cannot be released as another analyst's
work.
✔✔Standard VI(A) - ✔✔Disclosure of Conflicts
✔✔I(D) Misconduct - ✔✔Members and Candidates must not engage in any professional
conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely
on their professional reputation, integrity, or competence.
✔✔Recommended Procedures for Compliance - Misconduct - ✔✔Firms are encouraged
to adopt these policies and procedures:
-develop and adopt a code of ethics and make clear that unethical behavior will not be
tolerated
-give employees a list of potential violations and sanctions, including dismissal
-check references of potential employees
✔✔Standard II(A) Material Nonpublic Information - ✔✔Members and Candidates who
possess material nonpublic information that could affect the value of an investment
must not act or cause others to act on the information.
✔✔Material Information - ✔✔Information is material if its disclosure would impact the
price of a security or if reasonable investors would want the information before making
an investment decision
✔✔Mosaic Theory - ✔✔There is no violation when a perceptive analyst reaches an
investment conclusion about a corporate action or event through an analysis of public
information together with items of nonmaterial nonpublic information
✔✔Guidance - Social Media - ✔✔When gathering info from internet or social media
sources, members and candidates need to be aware that not all of it is considered
public info. Members and candidates should confirm that any material information they
receive from these sources is also available from public sources, such as company
press releases or regulatory filings
✔✔Guidance - Industry experts - ✔✔Members and candidates may seek insight from
individuals who have specialized expertise in an industry. However, they may not act or
cause others to act on any material nonpublic information obtained from these experts
until that info has been publicly disseminated
✔✔Standard II(B) Market Manipulation - ✔✔Members and Candidates must not engage
in practices that distort prices or artificially inflate trading volume with the intent to
mislead market participants.
✔✔Guidance - Market Manipulation - ✔✔This standard applies to transactions that
deceive the market by distorting the price-setting mechanism of financial instruments or
