CFA Level II Vignettes Ethics Standards Investment Advisory MCQs Test 1

Practice CFA 2026 Level II Vignettes Ethics Standards MCQs from Investment Advisory. Get instant results with Explanation.

Practice Quiz 1 for "Investment Advisory" (Ethics Standards). Total 30 MCQs available, split into 3 quizzes. Start with the fundamentals and build a strong base. Mastering these concepts is essential for securing a high percentile in CFA.

General10 MCQs

1. Vignette 1: Sterling Advisory Group - Robert Sterling, CFA, is an investment advisor. His employer mandates that all advisors recommend the firm's proprietary mutual fund as the primary investment for all clients. Sterling complies, even when lower-cost, better-performing alternatives exist. Has Sterling violated the Standards?

A. Acceptable because the fund is offered by his employerB. Unacceptable because Sterling violated Standard III(A) by prioritizing employer interests over client interestsC. Acceptable because he disclosed the conflict to the clientD. Unacceptable only if the fund underperforms its benchmark

2. Sterling tells a prospective client, "Based on our historical performance, you can expect returns of 15% per year from our investment strategy." Which Standard has Sterling most likely violated?

A. Standard I(C) - MisrepresentationB. Standard III(D) - Performance PresentationC. Standard VI(A) - Disclosure of ConflictsD. Standard V(B) - Communication with Clients and Prospective Clients

3. Sterling recommends a specific ETF to all his clients. He receives a 5% commission from the ETF provider for every client who invests. Sterling does not disclose this commission. Which Standard has Sterling violated?

A. Standard VI(A) - Disclosure of ConflictsB. Standard III(A) - Loyalty, Prudence, and CareC. Standard I(B) - Independence and ObjectivityD. Standard III(C) - Suitability

4. Sterling uses the firm's proprietary research and client database to develop a personal investment strategy for his own account during working hours. Which Standard has Sterling violated?

A. Standard III(A) - Loyalty, Prudence, and CareB. Standard I(B) - Independence and ObjectivityC. Standard IV(A) - Loyalty to EmployerD. Standard VI(A) - Disclosure of Conflicts

5. Sterling receives two VIP tickets to the Super Bowl from a company whose stock he recommends to clients. The tickets are worth $5,000 each. Has Sterling violated the Standards?

A. Yes, but only if the tickets are worth more than $1,000B. Yes, because the tickets could impair his independence and objectivity under Standard I(B)C. No, because the tickets are for a legitimate business eventD. No, because the company is not a client

General10 MCQs

6. Vignette 2: Hamilton Investment Advisors - David Hamilton, CFA, recommends cryptocurrency investments to all his clients, including a 75-year-old widow with a conservative risk profile and limited income. Has Hamilton violated the Standards?

A. Yes, for violating Standard III(A) - Loyalty, Prudence, and CareB. Yes, for violating Standard III(D) - Performance PresentationC. No, because cryptocurrency is a legitimate investment optionD. Yes, for violating Standard III(C) - Suitability

7. Hamilton posts on social media about a client's investment success, mentioning the client's name, portfolio size, and specific investments. Which Standard has Hamilton violated?

A. Standard III(E) - Preservation of ConfidentialityB. Standard III(A) - Loyalty, Prudence, and CareC. Standard IV(A) - Loyalty to EmployerD. Standard I(B) - Independence and Objectivity

8. Hamilton recommends a private placement investment to clients based solely on the promoter's offering memorandum, without conducting any independent due diligence. Which Standard has Hamilton violated?

A. Standard III(C) - SuitabilityB. Standard V(A) - Diligence and Reasonable BasisC. Standard I(C) - MisrepresentationD. Standard VI(A) - Disclosure of Conflicts

9. Hamilton earns substantial commissions by directing client trades to a specific broker. He continues to use this broker even when better execution prices are available elsewhere. Which Standard has Hamilton violated?

A. Standard I(B) - Independence and ObjectivityB. Standard IV(A) - Loyalty to EmployerC. Standard III(A) - Loyalty, Prudence, and CareD. Standard VI(B) - Priority of Transactions

10. Hamilton refers clients to a specific tax advisor and receives a 20% referral fee. He does not disclose this arrangement to his clients. Which Standard has Hamilton violated?

A. Standard III(A) - Loyalty, Prudence, and CareB. Standard III(C) - SuitabilityC. Standard IV(A) - Loyalty to EmployerD. Standard VI(A) - Disclosure of Conflicts

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Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 70 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

Subject breakdown not available.

Merit Formula: -

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CFA Level II Vignettes Ethics Standards Investment Advisory MCQs Test 1

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