CFA Level 1 Exam Questions & Answers 2026 (21–30)

Question 1

Which statement about the CFA designation complies with Standard VII(B)?

TheoryPractice · Accepted Answer

"I am a CFA charterholder" (after being awarded the charter).. Standard VII(B) prohibits misrepresenting the meaning of the designation. 'CFA' is an adjective, not a noun, and only those awarded the charter may state they are charterholders; no superiority of performance may be implied.

Question 2

The Global Investment Performance Standards (GIPS) are best described as:

TheoryPractice · Accepted Answer

Voluntary ethical standards for calculating and presenting investment performance. GIPS are voluntary, ethical standards based on fair representation and full disclosure that firms adopt to present investment performance consistently and comparably.

Question 3

To claim GIPS compliance, a firm must:

TheoryPractice · Accepted Answer

Comply on a firm-wide basis. GIPS compliance is a firm-wide commitment; a firm cannot claim partial compliance. All actual, fee-paying, discretionary portfolios must be included in at least one composite.

Question 4

An analyst is invited on an issuer-paid trip with lavish entertainment to tour a company before writing a report. To best preserve independence under Standard I(B), the analyst should:

TheoryPractice · Accepted Answer

Pay for her own commercial transportation and lodging when practicable. Standard I(B) requires maintaining independence and objectivity; modest, customary business benefits may be acceptable, but analysts should pay their own travel costs when feasible to avoid the appearance of being compromised.

Question 5

Brokerage commissions paid from client accounts (client brokerage) should be used by a manager to benefit primarily:

TheoryPractice · Accepted Answer

The client whose assets generated the commissions. Under Standard III(A), brokerage is an asset of the client and must be used to benefit the client, for example through best execution and research that benefits the client, not the manager personally.

Question 6

In allocating shares of a hot, oversubscribed IPO among suitable clients, a member best complies with Standard III(B) by:

TheoryPractice · Accepted Answer

Allocating pro rata across suitable client accounts on a fair basis. Fair Dealing requires equitable allocation of limited new issues among all suitable clients, typically pro rata, and members may not participate personally to the disadvantage of clients.

Question 7

Copying a third-party research report's analysis and presenting it as one's own without attribution violates the prohibition on:

TheoryPractice · Accepted Answer

Plagiarism under Standard I(C) Misrepresentation. Standard I(C) prohibits misrepresentation, including plagiarism, copying or using substantially the same materials prepared by others without acknowledgment of the source.

Question 8

An employee discovers her employer is engaged in ongoing illegal activity that harms clients. Acting against the employer's instructions to disclose this to authorities is:

TheoryPractice · Accepted Answer

Permitted, because protecting clients and the market can outweigh the duty to the employer. Standard IV(A) Loyalty generally favors the employer, but whistleblowing to protect clients, the integrity of capital markets, or the public from illegal or unethical acts is permitted when those interests outweigh loyalty to the employer.

Question 9

According to the CFA Institute Code of Ethics, members and candidates are required to:

TheoryPractice · Accepted Answer

Act with integrity, competence, diligence, and respect in their professional activities. The CFA Institute Code of Ethics requires members and candidates to act with integrity, competence, diligence, and respect in all professional activities. This is one of the foundational elements of the Code.

Question 10

An analyst works in a country where insider trading is not illegal. Under the CFA Institute Standards of Professional Conduct, the analyst should:

TheoryPractice · Accepted Answer

Adhere to the CFA Institute Standards, which prohibit trading on material nonpublic information. Standard I(A) requires members to comply with the more strict of applicable law or CFA Institute Standards. Since CFA Standards prohibit trading on material nonpublic information, the analyst must follow the Standards even when local law is less restrictive.

CFA Level 1 Exam Questions & Answers 2026 (21–30)

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