C FA I N S T I T U T E — L E V E L I
CFA Exam 3 — Morning
Session
Comprehensive Practice Questions with Detailed Rationales
CFA Level 1 — Morning Session — 120 Practice Questions
Edition 1 · July 2026 · 120 Practice Questions
✓ Institution: CFA Institute — Chartered Financial Analyst Level 1 Examination
Table of Contents
1. Instructions for Use 2
2. Practice Questions with Answers & Rationales 2
,CFA Level 1 · CFA Institute Page 1
,CFA EXAM 3 MORNING SESSION INSTRUCTIONS & PRACTICE QUESTIONS
How to Use This Guide
Read each stem, choose your answer, then check the rationale directly below it. The correct
option is marked, and each wrong option is explained so you understand why it's wrong — not
just that it is. This guide contains 120 practice questions covering key content areas for the CFA
Level 1 Morning Session.
Category: CFA Level 1 — Morning Session
1 According to the CFA Institute Code of Ethics and Standards of Professional Conduct,
trading on material nonpublic information is least likely to be prevented by
establishing:
A Fire-walls.
B Watch lists.
C Selective disclosure.
Why C is correct: Selective disclosure occurs when companies discriminate in making
material nonpublic information public. Corporations that disclose information on a limited
basis create the potential for insider-trading violations. Standard II (A).
A — Fire-walls help prevent the flow of material nonpublic information.
B — Watch lists help monitor trading activity in sensitive securities.
, 2 William Wong, CFA, is an equity analyst with Hayswick Securities. Based on his
fundamental analysis, Wong concludes the stock of a company he follows, Nolvec
Inc., is substantially undervalued and will experience a large price increase. He delays
revising his recommendation on the stock from "hold" to "buy" to allow his brother
to buy shares at a lower price. Wong is least likely to have violated the CFA Institute
Standards of Professional Conduct related to:
A Material Nonpublic Information.
B Diligence and Reasonable Basis.
C Priority of Transactions.
Why B is correct: There is nothing to suggest that Wong does not have a reasonable basis
for his conclusion related to Nolvec. Standard V (A).
A — He may have violated Standard II(A) by delaying the recommendation.
C — He may have violated Standard VI(B) by giving his brother priority.
3 During an onsite company visit, Marsha Ward, CFA, accidentally overheard the Chief
Executive Officer (CEO) of Stargazer, Inc. discussing the company's tender offer to
purchase Dynamica Enterprises, a retailer of Stargazer products. According to the
CFA Institute Standards of Professional Conduct, Ward most likely cannot use the
information because:
A It relates to a tender offer.
B It was overheard and might be considered unreliable.
C She does not have a reasonable and adequate basis for taking investment action.
Why A is correct: Trading on the information is restricted as it relates to a tender offer; it is
clearly material, nonpublic information. Standard II (A).
B — The reliability of the information is not the primary issue; it is material nonpublic
information.
C — The issue is that the information is material nonpublic, not the lack of a reasonable
basis.
CFA Exam 3 — Morning
Session
Comprehensive Practice Questions with Detailed Rationales
CFA Level 1 — Morning Session — 120 Practice Questions
Edition 1 · July 2026 · 120 Practice Questions
✓ Institution: CFA Institute — Chartered Financial Analyst Level 1 Examination
Table of Contents
1. Instructions for Use 2
2. Practice Questions with Answers & Rationales 2
,CFA Level 1 · CFA Institute Page 1
,CFA EXAM 3 MORNING SESSION INSTRUCTIONS & PRACTICE QUESTIONS
How to Use This Guide
Read each stem, choose your answer, then check the rationale directly below it. The correct
option is marked, and each wrong option is explained so you understand why it's wrong — not
just that it is. This guide contains 120 practice questions covering key content areas for the CFA
Level 1 Morning Session.
Category: CFA Level 1 — Morning Session
1 According to the CFA Institute Code of Ethics and Standards of Professional Conduct,
trading on material nonpublic information is least likely to be prevented by
establishing:
A Fire-walls.
B Watch lists.
C Selective disclosure.
Why C is correct: Selective disclosure occurs when companies discriminate in making
material nonpublic information public. Corporations that disclose information on a limited
basis create the potential for insider-trading violations. Standard II (A).
A — Fire-walls help prevent the flow of material nonpublic information.
B — Watch lists help monitor trading activity in sensitive securities.
, 2 William Wong, CFA, is an equity analyst with Hayswick Securities. Based on his
fundamental analysis, Wong concludes the stock of a company he follows, Nolvec
Inc., is substantially undervalued and will experience a large price increase. He delays
revising his recommendation on the stock from "hold" to "buy" to allow his brother
to buy shares at a lower price. Wong is least likely to have violated the CFA Institute
Standards of Professional Conduct related to:
A Material Nonpublic Information.
B Diligence and Reasonable Basis.
C Priority of Transactions.
Why B is correct: There is nothing to suggest that Wong does not have a reasonable basis
for his conclusion related to Nolvec. Standard V (A).
A — He may have violated Standard II(A) by delaying the recommendation.
C — He may have violated Standard VI(B) by giving his brother priority.
3 During an onsite company visit, Marsha Ward, CFA, accidentally overheard the Chief
Executive Officer (CEO) of Stargazer, Inc. discussing the company's tender offer to
purchase Dynamica Enterprises, a retailer of Stargazer products. According to the
CFA Institute Standards of Professional Conduct, Ward most likely cannot use the
information because:
A It relates to a tender offer.
B It was overheard and might be considered unreliable.
C She does not have a reasonable and adequate basis for taking investment action.
Why A is correct: Trading on the information is restricted as it relates to a tender offer; it is
clearly material, nonpublic information. Standard II (A).
B — The reliability of the information is not the primary issue; it is material nonpublic
information.
C — The issue is that the information is material nonpublic, not the lack of a reasonable
basis.
