CAIA Exam Review QUESTIONS
AND VERIFIED ANSWERS
2025(GRADED A+) DETAILED
ANSWERS!!
Six Standard of Professional Conduct - correct answersProfessionalism
Integrity of Capital Markets
Duties to Clients
Duties to Employers
Investment Analysis, Recommendations, and Actions
Conflicts of Interest
Six Standard of Professional Conduct: Professionalism - correct answers1. Knowledge of the Law
- Members must understand and comply with all applicable laws of all regulatory professional
,association governing their professional activities. In the event of conflict, members must
comply with the more strict ruling.
2. Independence and Objectivity - Members must use reasonable care and judgement to
achieve and maintain independence and objectivity. Members cannot accept any gift or
compensation that reasonably could be expected to compromise their own or another's
independence.
3. Misrepresentation - Members must not knowingly make any misrepresentations related to
investment analysis. recommendations, actions, or other professional activities.
4. Misconduct - Members must not engage in any professional conduct involving dishonesty,
fraud, or commit any act that reflects adversely on their professional reputation.
Six Standard of Professional Conduct: Integrity of Capital Markets - correct answers1. Material
Non-public Information - Members who posses material non-public information (MNPI) must
not act or cause others to act on the information.
2. Market Manipulation - embers must not engage in practices that distort prices or artificially
inflate trading volume with the intent to mislead market participants.
Six Standard of Professional Conduct: Duties to Clients - correct answers1. Loyalty, Prudence,
and Care - Members have a duty of loyalty to their clients and must exercise reasonable car and
prudent judgement
2. Fair Dealing - Members must deal fairly and objectively with all clients when engaging in
professional activities
3. Suitability - When members are in an advisory relationship with a client they must: 1) make a
reasonable inquiry into the clients investment experience, risk / return objectives, and financial
constraints, 2) Determine that the investment is suitable for the clients financial situation, and
3) Judge suitability in context with the clients overall portfolio.
4. Performance Presentation - When communicating investment performance information,
Members must make reasonable efforts to ensure the information is fair, accurate, and
complete.
5. Preservation of Confidentiality - Members must keep information about current, former, and
prospective clients confidential unless: 1) Info concerns illegal activities, 2)disclosure is required
by law, and 3) The client or prospect permits disclosure of the information.
,Six Standard of Professional Conduct: Duties to Employers - correct answers1. Loyalty -
Members must act for the benefit of their employer and not deprive employer of skills, abilities,
or otherwise cause harm to the employer.
2. Additional Compensation Arrangements - Members must not accept gifts or compensation
that creat a conflict of interest with their employers interests unless they obtain written consent
from both parties.
3. Responsibilities of Supervisors - Members must make reasonable efforts to ensure that
anyone subject to their supervision complies with applicable rules and regulations.
Six Standard of Professional Conduct: Investment Analysis, Recommendations, and Actions -
correct answers1. Diligence and Reasonable Bias - Members must 1) exercise diligence when
analyzing, recommending, and taking investment actions and 2) have a reasonable and
adequate basis backed by research for for any investment analysis, recommendations, and
Actions.
Six Standard of Professional Conduct: Conflicts of Interest - correct answers1. Disclosure of
Conflicts - Members must disclose all matters that could reasonably be expected to impair their
independence and objectivity. Disclosures must be prominent, delivered in plain language, and
communicated effectively.
2. Priority of Transactions - Investment transactions for clients must have priority over
investment transactions for the Member.
3. Referral fees - Members must disclose to their employer, clients, and prospective clients, any
compensation or benefit received from or paid to others for the recommendation of products
or services.
Local Law Guidance - correct answersMembers must know the laws and regulations for each
country i which they conduct business. When in doubt - always adhere to the most strict rules.
Association with Violation by Others Guidance - correct answersMembers should disassociate
themselves from any client, employer, or employee that is illegal or unethical.
Compliance Procedures Guidance - correct answersMember should have procedure to keep up
with changing laws and regulations.
, Compliance procedures should be reviewed on a regular basis to ensure they remain aligned
with the latest laws.
Members should maintain current reference materials for employees.
When in doubt, member should seek guidance from their counsel / compliance professionals.
Members should document any violation when disassociating with prohibited activity or
unethical relationships.
Members are encouraged to report misconduct by other members.
Recommended Compliance Procedures for Firms Guidance - correct answersMember should
encourage their firms to:
1. establish a code of ethics
2. Make available to employees information that highlights updated laws and regulations.
3. Establish written procedures for reporting any violations of laws, regulations, or policies.
Ethics Example:
Michael Allen works for a brokerage firm and is responsible for an underwriting of securities. A
company official gives Allen information indicating that the financial statements Allen filed with
the regulator overstate the issuer's earnings. Allen seeks the advice of the brokerage firm's
general counsel, who states that it would be difficult for the regulator to prove that Allen has
been involved in any wrongdoing. - correct answersAlthough it is recommended that members
and candidates seek the advice of legal counsel, the reliance on such advice does not absolve a
member or candidate from the requirement to comply with the law or regulation.
Allen should report this situation to his supervisor, seek an independent legal opinion, and
determine whether the regulator should be notified of the error.
Investment Banking Relationship Guidance - correct answersDo not be pressured by sell-side
firms to issue favorable research on current or prospective investment-banking clients. It is
appropriate to have analysts work with investment bankers in "road shows" only when the
conflicts are adequately and effectively managed and disclosed. Be sure there are effective
"firewalls" between research/investment management and investment-banking activities.
AND VERIFIED ANSWERS
2025(GRADED A+) DETAILED
ANSWERS!!
Six Standard of Professional Conduct - correct answersProfessionalism
Integrity of Capital Markets
Duties to Clients
Duties to Employers
Investment Analysis, Recommendations, and Actions
Conflicts of Interest
Six Standard of Professional Conduct: Professionalism - correct answers1. Knowledge of the Law
- Members must understand and comply with all applicable laws of all regulatory professional
,association governing their professional activities. In the event of conflict, members must
comply with the more strict ruling.
2. Independence and Objectivity - Members must use reasonable care and judgement to
achieve and maintain independence and objectivity. Members cannot accept any gift or
compensation that reasonably could be expected to compromise their own or another's
independence.
3. Misrepresentation - Members must not knowingly make any misrepresentations related to
investment analysis. recommendations, actions, or other professional activities.
4. Misconduct - Members must not engage in any professional conduct involving dishonesty,
fraud, or commit any act that reflects adversely on their professional reputation.
Six Standard of Professional Conduct: Integrity of Capital Markets - correct answers1. Material
Non-public Information - Members who posses material non-public information (MNPI) must
not act or cause others to act on the information.
2. Market Manipulation - embers must not engage in practices that distort prices or artificially
inflate trading volume with the intent to mislead market participants.
Six Standard of Professional Conduct: Duties to Clients - correct answers1. Loyalty, Prudence,
and Care - Members have a duty of loyalty to their clients and must exercise reasonable car and
prudent judgement
2. Fair Dealing - Members must deal fairly and objectively with all clients when engaging in
professional activities
3. Suitability - When members are in an advisory relationship with a client they must: 1) make a
reasonable inquiry into the clients investment experience, risk / return objectives, and financial
constraints, 2) Determine that the investment is suitable for the clients financial situation, and
3) Judge suitability in context with the clients overall portfolio.
4. Performance Presentation - When communicating investment performance information,
Members must make reasonable efforts to ensure the information is fair, accurate, and
complete.
5. Preservation of Confidentiality - Members must keep information about current, former, and
prospective clients confidential unless: 1) Info concerns illegal activities, 2)disclosure is required
by law, and 3) The client or prospect permits disclosure of the information.
,Six Standard of Professional Conduct: Duties to Employers - correct answers1. Loyalty -
Members must act for the benefit of their employer and not deprive employer of skills, abilities,
or otherwise cause harm to the employer.
2. Additional Compensation Arrangements - Members must not accept gifts or compensation
that creat a conflict of interest with their employers interests unless they obtain written consent
from both parties.
3. Responsibilities of Supervisors - Members must make reasonable efforts to ensure that
anyone subject to their supervision complies with applicable rules and regulations.
Six Standard of Professional Conduct: Investment Analysis, Recommendations, and Actions -
correct answers1. Diligence and Reasonable Bias - Members must 1) exercise diligence when
analyzing, recommending, and taking investment actions and 2) have a reasonable and
adequate basis backed by research for for any investment analysis, recommendations, and
Actions.
Six Standard of Professional Conduct: Conflicts of Interest - correct answers1. Disclosure of
Conflicts - Members must disclose all matters that could reasonably be expected to impair their
independence and objectivity. Disclosures must be prominent, delivered in plain language, and
communicated effectively.
2. Priority of Transactions - Investment transactions for clients must have priority over
investment transactions for the Member.
3. Referral fees - Members must disclose to their employer, clients, and prospective clients, any
compensation or benefit received from or paid to others for the recommendation of products
or services.
Local Law Guidance - correct answersMembers must know the laws and regulations for each
country i which they conduct business. When in doubt - always adhere to the most strict rules.
Association with Violation by Others Guidance - correct answersMembers should disassociate
themselves from any client, employer, or employee that is illegal or unethical.
Compliance Procedures Guidance - correct answersMember should have procedure to keep up
with changing laws and regulations.
, Compliance procedures should be reviewed on a regular basis to ensure they remain aligned
with the latest laws.
Members should maintain current reference materials for employees.
When in doubt, member should seek guidance from their counsel / compliance professionals.
Members should document any violation when disassociating with prohibited activity or
unethical relationships.
Members are encouraged to report misconduct by other members.
Recommended Compliance Procedures for Firms Guidance - correct answersMember should
encourage their firms to:
1. establish a code of ethics
2. Make available to employees information that highlights updated laws and regulations.
3. Establish written procedures for reporting any violations of laws, regulations, or policies.
Ethics Example:
Michael Allen works for a brokerage firm and is responsible for an underwriting of securities. A
company official gives Allen information indicating that the financial statements Allen filed with
the regulator overstate the issuer's earnings. Allen seeks the advice of the brokerage firm's
general counsel, who states that it would be difficult for the regulator to prove that Allen has
been involved in any wrongdoing. - correct answersAlthough it is recommended that members
and candidates seek the advice of legal counsel, the reliance on such advice does not absolve a
member or candidate from the requirement to comply with the law or regulation.
Allen should report this situation to his supervisor, seek an independent legal opinion, and
determine whether the regulator should be notified of the error.
Investment Banking Relationship Guidance - correct answersDo not be pressured by sell-side
firms to issue favorable research on current or prospective investment-banking clients. It is
appropriate to have analysts work with investment bankers in "road shows" only when the
conflicts are adequately and effectively managed and disclosed. Be sure there are effective
"firewalls" between research/investment management and investment-banking activities.
