CFA 2026 Mock Exam A Session 1 |
Complete Set of Questions, Answers &
Rationales
Section 1: Ethical and Professional Standards (Questions 1-18)
*Weight: 15-20% of exam*
Q1. John McCay, CFA, is an analyst who has prepared a report on the cable
industry based on research from a variety of sources and analysts. He
compiles these findings to form his own opinion and distributes the report to
clients without acknowledging his sources. McCay has violated the Standards
by:
A) failing to cite the work of others
B) failing to have a reasonable basis for his conclusions
C) incorporating other analysts' research into his own work
Correct ,,,answer,,,: A
Rationale: According to Standard I(C) – Misrepresentation, members must
disclose and cite the sources of their information to prevent plagiarism. One of the
most egregious practices is preparing research reports from multiple sources
without acknowledging them. This violates the Standard .
,Q2. Meera Doka, CFA, manages an equity fund for clients. One day, the fund
experiences a large loss due to an event unforeseen by all market participants.
Prior to the event, Doka failed to disclose the risk of this event occurring to
her clients. One month later, Doka decides to outsource 5% of the fund's
assets to an external manager. She does not inform her clients of this change
because the external manager follows an investment process that is very
similar to her fund's process. Are Doka's actions consistent with the Standard
relating to communication with clients and prospective clients?
A) Yes
B) No, because she failed to disclose the risk that resulted in the large loss
C) No, because she failed to inform her clients about outsourcing 5% of the fund's
assets
Correct ,,,answer,,,: C
Rationale: Standard V(B) – Communication with Clients requires disclosure of
changes in investment processes, including outsourcing. Even if the external
manager's process is similar, clients must be informed of material changes to the
fund's management structure .
Q3. A CFA charterholder shares a client's portfolio performance data with a
prospective client before obtaining written permission. This action most likely
violates:
A) Standard III(A) – Loyalty, Prudence, and Care
B) Standard III(E) – Preservation of Confidentiality
C) Standard V(B) – Communication with Clients
Correct ,,,answer,,,: B
,Rationale: Standard III(E) – Preservation of Confidentiality prohibits sharing
confidential client information without consent. Client performance data is
confidential, and sharing it without written permission directly violates this
Standard .
Q4. Gardner Knight, CFA, is a product development specialist at an
investment bank. Knight is responsible for creating and marketing
collateralized debt obligations (CDOs) consisting of residential mortgage
bonds. In the marketing brochure for his most recent CDO, Knight provided
a list of the mortgage bonds from which the CDO was created. The brochure
also states "an independent third party, the collateral manager, has sole
authority for the selection of all mortgage bonds used as collateral in the
CDO." However, Knight met with the collateral manager and contributed to
determining the bonds included in the CDO. Knight is least likely to be in
violation of which of the following Standards?
A) Suitability
B) Disclosure of Conflicts
C) Communication with Clients and Prospective Clients
Correct ,,,answer,,,: A
Rationale: There is no indication that the investment is unsuitable for investors, so
Standard III(C) – Suitability is not violated. However, Knight's contribution to
bond selection contradicts the brochure statement, violating disclosure and
communication standards .
, Q5. A CFA charterholder receives non-public information about a pending
acquisition from a company insider who is not a client. The information is
reliable and material. The charterholder should:
A) Trade on the information for the fund because it is not from a client
B) Seek to determine if the insider is allowed to share the information
C) Attempt to publicly disseminate the information
D) Refuse to trade and urge the insider to refrain from violating insider trading
laws
Correct ,,,answer,,,: D
Rationale: Standard II(A) – Material Nonpublic Information mandates that
members cannot act on MNPI. The primary responsibility is not to trade and to
discourage the breach of insider trading laws .
Q6. A member overhears material non-public information about a takeover.
He does not trade but tells his spouse to trade. This is:
A) Not a violation because he didn't trade
B) A violation of Standard II(A) – Material Nonpublic Information
C) A violation only if the spouse profits
Correct ,,,answer,,,: B
Rationale: Standard II(A) prohibits communicating MNPI to others ("tipping").
The member violated the Standard by telling his spouse to trade, even though he
did not trade personally .
Complete Set of Questions, Answers &
Rationales
Section 1: Ethical and Professional Standards (Questions 1-18)
*Weight: 15-20% of exam*
Q1. John McCay, CFA, is an analyst who has prepared a report on the cable
industry based on research from a variety of sources and analysts. He
compiles these findings to form his own opinion and distributes the report to
clients without acknowledging his sources. McCay has violated the Standards
by:
A) failing to cite the work of others
B) failing to have a reasonable basis for his conclusions
C) incorporating other analysts' research into his own work
Correct ,,,answer,,,: A
Rationale: According to Standard I(C) – Misrepresentation, members must
disclose and cite the sources of their information to prevent plagiarism. One of the
most egregious practices is preparing research reports from multiple sources
without acknowledging them. This violates the Standard .
,Q2. Meera Doka, CFA, manages an equity fund for clients. One day, the fund
experiences a large loss due to an event unforeseen by all market participants.
Prior to the event, Doka failed to disclose the risk of this event occurring to
her clients. One month later, Doka decides to outsource 5% of the fund's
assets to an external manager. She does not inform her clients of this change
because the external manager follows an investment process that is very
similar to her fund's process. Are Doka's actions consistent with the Standard
relating to communication with clients and prospective clients?
A) Yes
B) No, because she failed to disclose the risk that resulted in the large loss
C) No, because she failed to inform her clients about outsourcing 5% of the fund's
assets
Correct ,,,answer,,,: C
Rationale: Standard V(B) – Communication with Clients requires disclosure of
changes in investment processes, including outsourcing. Even if the external
manager's process is similar, clients must be informed of material changes to the
fund's management structure .
Q3. A CFA charterholder shares a client's portfolio performance data with a
prospective client before obtaining written permission. This action most likely
violates:
A) Standard III(A) – Loyalty, Prudence, and Care
B) Standard III(E) – Preservation of Confidentiality
C) Standard V(B) – Communication with Clients
Correct ,,,answer,,,: B
,Rationale: Standard III(E) – Preservation of Confidentiality prohibits sharing
confidential client information without consent. Client performance data is
confidential, and sharing it without written permission directly violates this
Standard .
Q4. Gardner Knight, CFA, is a product development specialist at an
investment bank. Knight is responsible for creating and marketing
collateralized debt obligations (CDOs) consisting of residential mortgage
bonds. In the marketing brochure for his most recent CDO, Knight provided
a list of the mortgage bonds from which the CDO was created. The brochure
also states "an independent third party, the collateral manager, has sole
authority for the selection of all mortgage bonds used as collateral in the
CDO." However, Knight met with the collateral manager and contributed to
determining the bonds included in the CDO. Knight is least likely to be in
violation of which of the following Standards?
A) Suitability
B) Disclosure of Conflicts
C) Communication with Clients and Prospective Clients
Correct ,,,answer,,,: A
Rationale: There is no indication that the investment is unsuitable for investors, so
Standard III(C) – Suitability is not violated. However, Knight's contribution to
bond selection contradicts the brochure statement, violating disclosure and
communication standards .
, Q5. A CFA charterholder receives non-public information about a pending
acquisition from a company insider who is not a client. The information is
reliable and material. The charterholder should:
A) Trade on the information for the fund because it is not from a client
B) Seek to determine if the insider is allowed to share the information
C) Attempt to publicly disseminate the information
D) Refuse to trade and urge the insider to refrain from violating insider trading
laws
Correct ,,,answer,,,: D
Rationale: Standard II(A) – Material Nonpublic Information mandates that
members cannot act on MNPI. The primary responsibility is not to trade and to
discourage the breach of insider trading laws .
Q6. A member overhears material non-public information about a takeover.
He does not trade but tells his spouse to trade. This is:
A) Not a violation because he didn't trade
B) A violation of Standard II(A) – Material Nonpublic Information
C) A violation only if the spouse profits
Correct ,,,answer,,,: B
Rationale: Standard II(A) prohibits communicating MNPI to others ("tipping").
The member violated the Standard by telling his spouse to trade, even though he
did not trade personally .
