Learning Module 3 Guidance for Standards I–VII

Under Standard I(A) Knowledge of the Law, if a firm policy is less strict than the CFA Code and Standards, what must a CFA Institute member do in that jurisdiction?

An analyst is offered payment by an issuer to produce a research report on that issuer. According to the guidance for Standard I(B) and Standard V(A), which practice best preserves research independence?

You overhear a senior manager at your firm mentioning confidential board discussions about a pending acquisition that would be material to the target's stock price. According to Standard II(A), your best immediate action is to:

A research analyst learns that a corporate client will miss its next-quarter earnings target, but this has not been publicly announced. Under Standard II(A), which of the following is correct?

Which action best demonstrates appropriate independence and objectivity under Standard I(B) when attending an issuer-hosted site visit paid by the issuer?

A portfolio manager receives information that an upcoming IPO will be heavily oversubscribed. As a best practice under Standard III(B) Fair Dealing and Standard I(B), how should IPO allocations be handled?

Which record-retention practice best aligns with Standard V(C) Record Retention for an investment analyst who relies on third-party research?

A firm changes its quantitative model inputs and this produces materially different portfolio attributions. Under Standard III(D) and V(B), how should the firm communicate this change to clients?

A junior analyst proposes to include a short promotional piece on the firm website claiming the firm’s team has unique proprietary analytics. Under Standard I(C) and V(A), what must the firm ensure before posting?

An adviser receives a call from a client requesting an investment that deviates materially fromthe client’s documented IPS. Under Standard III(C) Suitability, what is the adviser’s most appropriate immediate step?

You are evaluating whether to hire an external manager for a specific asset class. According to Standard V(A), which due diligence action is least acceptable?

A fund claims compliance with the GIPS standards. What additional step adds strongest independent credibility to the claim?

Under Standard IV(B) Additional Compensation Arrangements, which of the following must a member do before accepting outside payment for client referrals?

An analyst repackages third-party research to clients and claims it as the firm’s proprietary analysis. Under Standard I(C), what must the analyst do instead?

A junior advisor discovered an accounting error in a prior performance report distributed to clients. Under Standard III(D) Performance Presentation, the advisor should:

Which practice best meets the requirements of Standard I(E) Competence when an analyst’s role expands to cover new asset classes?

Under Standard VI(A) Avoid or Disclose Conflicts, which disclosure is required when a portfolio manager’s spouse receives special IPO allocations from an issuer that the manager follows?

Your firm considers buying an analyst’s proprietary quantitative screening tool from a vendor. Under Standard V(A) and I(C), what should the firm require before adoption?

An analyst publishes a report quoting an influential blogger as saying a drug trial’s early results were disappointing. Under Standard I(C) Misrepresentation and II(A), what is required?

Which is the strongest action a supervisor should take under Standard IV(C) when an analyst repeatedly fails to follow the firm’s research due-diligence checklist?

A portfolio manager places a large block order for a thinly traded stock on behalf of a client. Best execution and Standard III(A) require that the manager:

When a firm claims compliance with the GIPS standards, which of the following is required for the firm’s performance presentation under Standard III(D)?

If an employee uncovers apparent illegal conduct by supervisors and internal efforts to remedy it have failed, Standard I(A) suggests the employee should next:

A senior analyst receives an expensive gift from a broker after giving the broker significant execution volume. Under Standard I(B) and VI(A), what is the appropriate firm policy action?

When an adviser provides different service tiers (standard vs premium) at different price points, which of the following is required by Standard III(B) Fair Dealing?

A fund includes only top-performing client accounts in its marketing composite to highlight strong results. Under GIPS and Standard III(D), this practice is:

Under Standard VI(B) Priority of Transactions, when a manager has a personal beneficial interest in a security that the firm is about to purchase for multiple client portfolios, the manager should:

A candidate who just completed a CFA exam wants to post exam impressions online. Under Standard VII(A), which is acceptable?

A fund manager asks a junior analyst to incorporate ESG scores from an external vendor into the firm’s model. Under Standards V(A) and I(C), what steps should the analyst take before using the vendor’s scores in client-facing models?

Which approach best satisfies Standard III(E) Preservation of Confidentiality when a regulator requests client records during an investigation?

Which of the following allocation procedures best satisfies Standard III(B) Fair Dealing for partial fills of block trades across client accounts?

A manager discovers a modeling error that materially overstated portfolio performance used in marketing materials. Standard III(D) requires that the manager:

Under Standard I(C), when a compliance officer becomes aware that marketing materials omit discussion of significant fund leverage that increases risk, the officer should:

A portfolio manager’s compensation is tied to quarterly relative performance. Standard I(B) and III(A) raise concerns because such a structure most likely:

Which personal-trading policy best satisfies Standards I(B), VI(B), and IV(C) when investment professionals may trade securities also held by clients?

An adviser provides a brief performance snapshot to a prospect. Under Standard III(D), what disclosure should accompany a short-form yield claim?

When is it acceptable under Standard VI(C) to accept a referral fee paid by a product provider for client introductions?

An adviser is approached by a candidate in the CFA Program who wants to add "CFA Level II" to their business card after passing Level II. Under Standard VII(B), what should the adviser advise the candidate?

If an employee doubts the adequacy of their firm’s AML procedures while handling client accounts, Standard I(A) and IV(C) suggest the employee should first:

A manager has adopted an enhanced firewall between research and investment banking. Which of the following changes best demonstrates compliance with Standard I(B) Independence and Objectivity?

Which action would most likely violate Standard I(D) Misconduct if committed by an investment professional?

If a quantitative model used to price structured products was discovered to contain optimistic assumptions not disclosed to investors, which Standards are implicated and what is the appropriate remedial step?

A candidate is preparing social media content to promote their exam tutoring business. Under Standard VII(B), which statement is allowed?

Which behavior would violate Standard VI(A) Avoid or Disclose Conflicts when a portfolio manager’s firm underwrites an issuer and the manager’s team covers the issuer’s research?

During a market-moving webinar, an analyst mentions she is 'considering' raising price targets for a stock based on private conversations with management. Under Standard II(A) and V(B), the analyst should:

Which course of action fulfills Standard IV(B) when an adviser is offered a sales commission by a product provider for steering clients to its funds?

A manager claims in marketing materials: 'Our proprietary model guarantees 8% annual returns.' Under Standard I(C) and V(A), this claim is:

Which supervisory control best addresses concerns in Standards IV(C) and II(A) about insider information spreading within a multi-service firm?

An adviser alters an account’s benchmark after a period of poor performance so the returns look better. Under Standard III(D) and V(C), this conduct is:

A firm wants to claim it complies with the CFA Institute Code and Standards but only follows select provisions. Under the guidance, is the selective-claim approach allowed?