CFA Level II Vignettes Ethics Standards Wealth Management MCQs Test 1

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

Practice Quiz 1 for "Wealth Management" (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: Thompson Wealth Management - Sarah Thompson, CFA, is a wealth manager at Thompson Wealth Management. The firm offers proprietary mutual funds to clients. Thompson recommends to all her clients that they allocate 70% of their equity portfolio to the firm's proprietary growth fund, which charges a 2.5% management fee compared to 1.2% for similar non-proprietary funds. She does not disclose the fee differential. Has Thompson violated the CFA Institute Standards of Professional Conduct?

A. Acceptable because clients hiring Thompson Wealth should expect the firm to prefer its own fundsB. Acceptable only if Thompson discloses the conflict of interest and the fee differential to clients before implementationC. Unacceptable because proprietary funds can never be recommended to clientsD. Unacceptable only if the proprietary fund underperforms its benchmark

2. Following the previous scenario, Thompson recommends a complex options strategy to a new client, Mrs. Patterson, a 72-year-old retiree with a conservative risk tolerance. Thompson does not conduct a formal suitability assessment before making this recommendation. Has Thompson violated the Standards?

A. Yes, for violating Standard I(B) - Independence and ObjectivityB. Yes, for violating Standard III(A) - Loyalty, Prudence, and CareC. Yes, for violating Standard III(C) - SuitabilityD. No, because the strategy was recommended by a senior analyst

3. Thompson personally owns shares of ABC Corporation. She receives a buy recommendation from her research team and purchases 10,000 shares for her personal account at 9:30 AM. She then places buy orders for her clients at 10:15 AM. Did Thompson violate the Standards?

A. Yes, she violated Standard III(A) - Loyalty, Prudence, and CareB. Yes, she violated Standard VI(B) - Priority of TransactionsC. No, because she disclosed the trades to her supervisorD. No, because the trades were executed on the same day

4. At a social gathering, Thompson discusses the investment portfolio of one of her wealth management clients, Mr. Chen, mentioning his net worth, risk tolerance, and specific holdings, without revealing his name. Has Thompson violated the Standards?

A. Yes, she violated Standard I(B) - Independence and ObjectivityB. Yes, she violated Standard III(C) - SuitabilityC. No, because she did not mention the client's nameD. Yes, she violated Standard III(E) - Preservation of Confidentiality

5. Thompson is eligible for a year-end bonus based on the overall performance of her clients' portfolios. She recommends a high-fee alternative investment to a client that will significantly boost her performance metrics. Is Thompson required to disclose this potential bonus to the client?

A. No, because the bonus is based on performance not on specific product salesB. Yes, she must disclose the potential bonus as a conflict of interest under Standard VI(A)C. Yes, but only if the bonus exceeds 10% of her compensationD. No, because the bonus is disclosed to her employer

General10 MCQs

6. Vignette 2: Riverside Wealth Advisors - Carlos Rodriguez, CFA, is a wealth manager at Riverside Wealth Advisors. The firm receives a highly oversubscribed IPO allocation. Rodriguez allocates 80% of the shares to his family members' accounts and only 20% to other clients, despite all clients having similar investment mandates. Has Rodriguez violated the Standards?

A. Acceptable because family members are also clients of the firmB. Acceptable because Rodriguez has discretion over IPO allocationsC. Unacceptable because Rodriguez violated Standard III(A) by not acting in the best interest of all clientsD. Unacceptable only if the IPO shares declined in value

7. Rodriguez invests 85% of a client's portfolio in the firm's proprietary hedge fund, which charges a 2% management fee and 20% performance fee. The firm earns significant revenue from this fund. Rodriguez does not disclose to the client that lower-cost alternatives exist. Which Standard has Rodriguez most likely violated?

A. Standard I(B) - Independence and ObjectivityB. Standard III(C) - SuitabilityC. Standard IV(A) - Loyalty to EmployerD. Standard III(A) - Loyalty, Prudence, and Care

8. Rodriguez presents a client report showing that the client's portfolio returned 15% over the past year, comparing it to a conservative bond index that returned 3%. The portfolio's appropriate benchmark, a balanced 60/40 index, returned 12%. Has Rodriguez violated the Standards?

A. Standard III(D) - Performance PresentationB. Standard I(C) - MisrepresentationC. Standard V(B) - Communication with Clients and Prospective ClientsD. Standard VI(A) - Disclosure of Conflicts

9. Rodriguez uses firm resources, including research reports and proprietary analytics, to manage his personal investment portfolio during work hours. He does not charge the firm for this use. Which Standard has Rodriguez violated?

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

10. Rodriguez recommends that all his clients invest in a complex alternative investment strategy recommended by an external manager. Rodriguez does not conduct his own due diligence on the strategy and relies entirely on the manager's marketing materials. Has Rodriguez violated the Standards?

A. Yes, he violated Standard I(C) - MisrepresentationB. Yes, he violated Standard III(C) - SuitabilityC. Yes, he violated Standard V(A) - Diligence and Reasonable BasisD. No, because he relied on the expertise of the external manager

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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 Wealth Management MCQs Test 1

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