CFA (CHARTERED FINANCIAL ANALYST) LEVEL I COMPREHENSIVE
COMPLETE EXAM QUESTIONS AND CORRECT ANSWERS (2026-2027)
1. Q: What are the six components of the Code of Ethics? ANSWER Act
with integrity, competence, diligence, and respect; place clients' interests before
your own; use reasonable care and judgment; practice in an ethical manner;
promote integrity and uphold rules; and maintain and improve professional
competence.
2. Q: Under Standard I(A) Knowledge of the Law, what must a member do
if they suspect a violation of applicable laws? ANSWER The member must
disassociate from the violation and may need to report it to appropriate
authorities or supervisors, depending on the severity and jurisdiction.
3. Q: What is the difference between the Code and Standards versus local
law when they conflict? ANSWER Members must comply with the more
strict requirement. If local law is stricter, follow local law. If the Code and
Standards are stricter, follow them.
4. Q: Under Standard I(B) Independence and Objectivity, what must
members do regarding gifts? ANSWER Members must not accept gifts,
benefits, or consideration that could reasonably be expected to compromise
their independence and objectivity or that of others.
5. Q: What defines "material" nonpublic information under Standard
II(A)? ANSWER Information that a reasonable investor would want to know
before making an investment decision and that would likely affect the security's
price.
6. Q: What is the mosaic theory? ANSWER The concept that analysts can
combine nonmaterial nonpublic information with public information to reach
material conclusions without violating insider trading laws.
7. Q: Under Standard III(A) Loyalty, Prudence, and Care, who is
considered a client? ANSWER Clients include individual investors, pension
plan beneficiaries, and others to whom members owe a duty of loyalty.
,8. Q: What is "soft dollar" arrangement? ANSWER When a firm uses
client brokerage commissions to purchase research or other services that benefit
the firm, which is permitted only if it benefits the client.
9. Q: Under Standard III(C) Suitability, what must be determined before
making recommendations? ANSWER The investment's suitability in relation
to the client's investment objectives, constraints, risk tolerance, time horizon,
and financial circumstances.
10. Q: What is required under Standard III(D) Performance Presentation?
ANSWER Members must present performance information that is fair,
accurate, and complete, avoiding misrepresentation of past or expected
performance.
11. Q: Under Standard IV(A) Loyalty, when can a member leave their
employer? ANSWER Members may leave but cannot take employer property,
solicit current clients before leaving, or engage in activities that would harm the
employer while still employed.
12. Q: What must be disclosed under Standard VI(A) Disclosure of
Conflicts? ANSWER All matters that could reasonably be expected to impair
independence and objectivity or interfere with duties to clients and employers.
13. Q: Under Standard VI(B) Priority of Transactions, whose interests
come first? ANSWER Clients' interests come first, then employers', then the
member's personal interests.
14. Q: What is required under Standard VII(A) Conduct as Participants in
CFA Institute Programs? ANSWER Members must not engage in conduct
that compromises the reputation or integrity of CFA Institute or the CFA
designation or integrity of the examination.
15. Q: What constitutes plagiarism under Standard I(C)? ANSWER Using
someone else's work or ideas without proper attribution, including copying from
published materials, colleagues, or proprietary models.
16. Q: What is the prudent investor rule? ANSWER The requirement to act
with care, skill, prudence, and diligence that a prudent person would use when
investing someone else's assets.
17. Q: Under what circumstances can material nonpublic information be
used? ANSWER Only after it has been disseminated to the marketplace and
investors have had time to react to it, making it public information.
, 18. Q: What is a firewall in the context of Standard II(A)? ANSWER
Information barriers within a firm designed to prevent the communication of
material nonpublic information between departments.
19. Q: What must members do if they discover a mistake in their work?
ANSWER Correct the error promptly, inform affected parties, and take steps to
prevent future errors under Standard I(A) and due diligence requirements.
20. Q: What is required for compliance with Standard III(E) Preservation
of Confidentiality? ANSWER Members must keep client information
confidential unless disclosure is required by law, permitted by the client, or
necessary to prevent illegal activity.
21. Q: What restrictions exist under Standard IV(B) Additional
Compensation Arrangements? ANSWER Members must not accept
compensation that competes with employer's interest without written consent
from all parties.
22. Q: What is the recommended compliance procedure for personal
trading? ANSWER Pre-clearance of trades, duplicate confirmations,
disclosure of holdings, and restrictions on trading in securities about which the
employee has material information.
23. Q: Under Standard V(A) Diligence and Reasonable Basis, what is
required? ANSWER Members must have reasonable and adequate basis for
investment analysis, recommendations, and actions, supported by appropriate
research and investigation.
24. Q: What must be included in research reports under Standard V(B)?
ANSWER Clear distinction between fact and opinion, basic characteristics of
securities, risks, and disclosed conflicts of interest.
25. Q: What is "front running"? ANSWER Trading ahead of client orders to
benefit from anticipated price movement, which violates Standard VI(B)
Priority of Transactions.
26. Q: What defines a "reasonable period" for preserving records under
Standard V(C)? ANSWER At least seven years or as required by applicable
law, whichever is longer.
27. Q: What is cherry-picking in trade allocation? ANSWER Allocating
profitable trades to favored accounts and unprofitable ones to others, which
violates fair dealing standards.
COMPLETE EXAM QUESTIONS AND CORRECT ANSWERS (2026-2027)
1. Q: What are the six components of the Code of Ethics? ANSWER Act
with integrity, competence, diligence, and respect; place clients' interests before
your own; use reasonable care and judgment; practice in an ethical manner;
promote integrity and uphold rules; and maintain and improve professional
competence.
2. Q: Under Standard I(A) Knowledge of the Law, what must a member do
if they suspect a violation of applicable laws? ANSWER The member must
disassociate from the violation and may need to report it to appropriate
authorities or supervisors, depending on the severity and jurisdiction.
3. Q: What is the difference between the Code and Standards versus local
law when they conflict? ANSWER Members must comply with the more
strict requirement. If local law is stricter, follow local law. If the Code and
Standards are stricter, follow them.
4. Q: Under Standard I(B) Independence and Objectivity, what must
members do regarding gifts? ANSWER Members must not accept gifts,
benefits, or consideration that could reasonably be expected to compromise
their independence and objectivity or that of others.
5. Q: What defines "material" nonpublic information under Standard
II(A)? ANSWER Information that a reasonable investor would want to know
before making an investment decision and that would likely affect the security's
price.
6. Q: What is the mosaic theory? ANSWER The concept that analysts can
combine nonmaterial nonpublic information with public information to reach
material conclusions without violating insider trading laws.
7. Q: Under Standard III(A) Loyalty, Prudence, and Care, who is
considered a client? ANSWER Clients include individual investors, pension
plan beneficiaries, and others to whom members owe a duty of loyalty.
,8. Q: What is "soft dollar" arrangement? ANSWER When a firm uses
client brokerage commissions to purchase research or other services that benefit
the firm, which is permitted only if it benefits the client.
9. Q: Under Standard III(C) Suitability, what must be determined before
making recommendations? ANSWER The investment's suitability in relation
to the client's investment objectives, constraints, risk tolerance, time horizon,
and financial circumstances.
10. Q: What is required under Standard III(D) Performance Presentation?
ANSWER Members must present performance information that is fair,
accurate, and complete, avoiding misrepresentation of past or expected
performance.
11. Q: Under Standard IV(A) Loyalty, when can a member leave their
employer? ANSWER Members may leave but cannot take employer property,
solicit current clients before leaving, or engage in activities that would harm the
employer while still employed.
12. Q: What must be disclosed under Standard VI(A) Disclosure of
Conflicts? ANSWER All matters that could reasonably be expected to impair
independence and objectivity or interfere with duties to clients and employers.
13. Q: Under Standard VI(B) Priority of Transactions, whose interests
come first? ANSWER Clients' interests come first, then employers', then the
member's personal interests.
14. Q: What is required under Standard VII(A) Conduct as Participants in
CFA Institute Programs? ANSWER Members must not engage in conduct
that compromises the reputation or integrity of CFA Institute or the CFA
designation or integrity of the examination.
15. Q: What constitutes plagiarism under Standard I(C)? ANSWER Using
someone else's work or ideas without proper attribution, including copying from
published materials, colleagues, or proprietary models.
16. Q: What is the prudent investor rule? ANSWER The requirement to act
with care, skill, prudence, and diligence that a prudent person would use when
investing someone else's assets.
17. Q: Under what circumstances can material nonpublic information be
used? ANSWER Only after it has been disseminated to the marketplace and
investors have had time to react to it, making it public information.
, 18. Q: What is a firewall in the context of Standard II(A)? ANSWER
Information barriers within a firm designed to prevent the communication of
material nonpublic information between departments.
19. Q: What must members do if they discover a mistake in their work?
ANSWER Correct the error promptly, inform affected parties, and take steps to
prevent future errors under Standard I(A) and due diligence requirements.
20. Q: What is required for compliance with Standard III(E) Preservation
of Confidentiality? ANSWER Members must keep client information
confidential unless disclosure is required by law, permitted by the client, or
necessary to prevent illegal activity.
21. Q: What restrictions exist under Standard IV(B) Additional
Compensation Arrangements? ANSWER Members must not accept
compensation that competes with employer's interest without written consent
from all parties.
22. Q: What is the recommended compliance procedure for personal
trading? ANSWER Pre-clearance of trades, duplicate confirmations,
disclosure of holdings, and restrictions on trading in securities about which the
employee has material information.
23. Q: Under Standard V(A) Diligence and Reasonable Basis, what is
required? ANSWER Members must have reasonable and adequate basis for
investment analysis, recommendations, and actions, supported by appropriate
research and investigation.
24. Q: What must be included in research reports under Standard V(B)?
ANSWER Clear distinction between fact and opinion, basic characteristics of
securities, risks, and disclosed conflicts of interest.
25. Q: What is "front running"? ANSWER Trading ahead of client orders to
benefit from anticipated price movement, which violates Standard VI(B)
Priority of Transactions.
26. Q: What defines a "reasonable period" for preserving records under
Standard V(C)? ANSWER At least seven years or as required by applicable
law, whichever is longer.
27. Q: What is cherry-picking in trade allocation? ANSWER Allocating
profitable trades to favored accounts and unprofitable ones to others, which
violates fair dealing standards.
