Chartered Financial Analyst Level I Ethical and Professional Standards

1.Adrian hears Northline Tools' chief executive tell a colleague in the hallway that the quarter was missed. Nothing has been released. A friend asks Adrian whether to sell Northline before the announcement. What should Adrian do?

2.On Sunday night Bianca's spouse, who works on the deal, tells her Plover Systems will announce a merger with Hartwell Glass on Monday. Bianca owns Hartwell. What follows if she sells Hartwell before the open?

3.Caleb's buy view on Maple Grocery comes from its public filings, Saturday store visits, and supplier calls about facts those suppliers already tell other customers. No insider is involved. What may he do?

4.A trial consultant bound by a confidentiality agreement offers Dahlia an early look at Ridgeline Bio's phase-three results, which are not public. She covers the stock. What should she do with the preview?

5.A company officer tells Ethan, privately, that a buyout price has been set and is not yet public. Ethan tells his sister to skip the shares and buy call options. What is that advice?

6.Farah heard last week that Halden Paper would close a mill. Tuesday at 7 a.m. the company issued a press release announcing that closing. She wants to sell her shares that afternoon. What may she do?

7.Gideon is not sure the comment is true. A director told him, off the record, that the board may cut the dividend, which would move the price if it happens. A colleague asks him to confirm it. What should he do?

8.Helena manages the Harbor Value Fund. The issuer's controller tells her a downward earnings restatement is coming and is still private. She wants to sell only inside the fund, not in her personal account. What is the fund sale?

9.A banker tells Ivan the exchange ratio and break fee of a merger that has not been announced. Ivan repeats both terms in a note and sends it to the firm's clients. What is that publication?

10.Juniper learns material nonpublic information about Oak Street Bancorp, adds the name to her firm's watch list, and then keeps buying it in client accounts. What does that list require of her trading?

11.Kenji finishes a downgrade of Pellam Metals. At 9 a.m. he emails it to two large clients. At noon he emails it to every other client who pays for the same research service. What should he have done?

12.Lila's firm has an oversubscribed new issue. Several client accounts are suitable and still unfilled. She fills her brother's account in full before those other clients. What is that allocation?

13.Marco works a block buy and receives only 12,000 of the 30,000 shares he sought. Eight suitable discretionary accounts were in the order. How should he allocate the 12,000?

14.Nadia finishes a sell recommendation on Tuesday afternoon. She holds the note overnight so a friend can sell Wednesday morning before other clients see it. What is that delay?

15.Oscar's firm offers standard and premium services. Both, including a two-hour earlier delivery of his notes to premium clients, are described in the advisory agreement before the client signs. Is that timing allowed?

16.Paloma's team issues a buy on Cedar Freight. Before any client order is sent, she buys 5,000 shares for the firm's house account and pays a lower price. What should have been filled first?

17.Quentin advises a non-discretionary account. The client demands one speculative stock that clashes with the written objectives. Quentin warns him clearly. The trade itself is lawful. What should Quentin do?

18.Rosa has discretion, and the written policy excludes concentrated speculative stocks. The client calls and demands one of those stocks anyway. What should Rosa do with the demand?

19.Samir receives a small allocation of a hot new issue. He gives the shares to the three accounts that paid the most commissions last quarter and skips other suitable accounts. What is wrong with that basis?

20.Tessa's written policy allows only investment-grade bonds. A high-yield issuer's spread looks wide versus its own history, and she wants to buy that bond. What should she do?

21.Ulrich's client says she is an aggressive investor. The cash she wants in equities is the down payment on a house she plans to buy in seven months. What should drive his recommendation?

22.In March, Vera's client loses his job and asks her to put his emergency cash into equities. The written policy still assumes he is employed and needs that reserve. What should she do first?

23.In January, Wesley recommended a bond using the client's income need, horizon, and the issuer's filings that day. By June the bond had fallen after an unexpected lawsuit. What decides whether January's recommendation was suitable?

24.Ximena's client holds 90 percent in cash. The written policy allows up to 10 percent in one volatile stock, and she recommends exactly that 10 percent. A colleague says any volatile stock is unsuitable. What follows?

25.Yusuf takes over an account full of positions that violate the client's current policy statement. The prior advisor bought every one of them. What should Yusuf do?

26.Zara's client has no emergency reserve. He wants a margin loan so he can put the borrowed money into one stock, and he asks her to recommend that purchase. What should she tell him?

27.Amelia sits for the Level I exam next month and has not passed it. On a client call she says, I am a charterholder. What is that sentence?

28.Brooks is enrolled for the next Level II exam and does not hold the charter. His biography draft has two lines: Level II candidate, and charterholder. Which line may he use?

29.Celeste pastes a full paragraph of valuation commentary from a broker's note into her report. She does not name the broker or mark the paragraph as borrowed. What is that use?

30.Darius tells a client his income strategy will return 8 percent next year. Eight percent is his model's expected return, and the range around it is wide. What is wrong with that sentence?

31.Elise writes that a municipal bond is rated A3 and names the rating agency in the same sentence. She does not claim the letters are her own grade. What about that quotation?

32.Felix shows prospects a composite of advisory accounts. He removed every account that closed after a loss, and the presentation never says he did that. What does the composite do?

33.Greta's chart is a backtest. She never ran the strategy in real time. The heading on the client page reads live results since 2019. What should that heading say?

34.Hugo's firm has not adopted the voluntary performance-presentation standards. In a final pitch he tells the prospect the firm complies with them. What should he do with that claim?

35.Ingrid's accountant reconciled client cash to the custodian statements. Nobody examined how performance was calculated. She tells a prospect the performance was audited. What is that claim?

36.While Javier is drafting a report on a hotel company, the issuer offers him a resort weekend. The invitation has no office meeting and no property tour. What should he do?

37.Kira visits a headquarters with other analysts. During the meetings the company buys the group a modest working lunch in the office, and every analyst on the visit is offered the same lunch. What does that lunch do to her independence?

38.A manufacturer pays Leon's firm a flat fee to produce a research report on the company. Leon is about to publish the report, and the draft never mentions the fee. What must the report state?

39.After a strong year, a client sends Maya a modest gift. Her firm's written rule allows a gift of that size only when it is reported to compliance. What may she do?

40.Nico rates an issuer hold. Investment banking asks him to lift the rating to buy before the firm prices that issuer's financing. What should happen to the rating?

41.Odette owns 2,000 shares of a company she is about to recommend in a buy note. The draft does not mention the holding. What should she add before the note goes out?

42.Paolo is publishing on a company whose recent stock offering his firm managed. The draft does not mention that role. What should the report include?

43.Quinn helps allocate a scarce new issue. He puts shares in a chief executive's personal account so that executive will keep calling him with company updates. What is that allocation?

44.No commercial flight reaches a remote mine Rhea needs to see. The company offers to fly her there and back for the site visit only. She also wants the company to pay for a weekend in another city. What may she accept?

45.Stefan chooses brokers for client trades. One broker offers him a watch if he sends more of those client orders to that desk. What should Stefan do with the offer?

46.A client offers Tamara a personal bonus if the account beats a stated hurdle this year. Her employer does not yet know about the offer. What should she do before accepting?

47.A lawyer offers Umberto a referral fee for clients he sends over. One client is about to hire that lawyer on Umberto's introduction. What should Umberto do before the client hires anyone?

48.Violet recommends a product that pays her a commission from the sponsor on top of her advisory fee. The client has not been told about that commission. What must she do before the client acts?

49.Warren's soft-dollar credits, earned on client trades, pay for a research service the team uses when it builds client portfolios. What about that use of the credits?

50.Yasmin has soft-dollar credits from client trading. She uses them to pay the rent on her own office. Client portfolios receive no research from that payment. What is that use?

51.Zachary sends client trades to a broker who, in return, provides Zachary's personal vacation. He did not choose that broker for execution quality. What about that direction of trades?

52.Anika teaches an evening class on her own time, uses only public material, and the college pays her. Her firm requires written consent for any outside pay. What should she do?

53.A long-time client gives Bruno ordinary sports tickets for his birthday. He reports the gift under a firm policy that allows gifts of that kind when they are reported. What may he do?

54.Camille's client admits he has been hiding income from the tax authority and asks her to keep structuring the account so the hiding continues. What should she do?

55.Declan's client has not authorized anyone else to receive account information. The client's spouse calls and asks for the current balance. What should Declan do?

56.Elena's client has died. The executor, with papers showing that appointment, asks for a list of the holdings. What should Elena do?

57.Finn's former client left the firm two years ago. A reporter asks what that person used to hold. What duty does Finn still have?

58.Giselle receives a lawful subpoena for a client's account records. The client has not consented to the production. What should she do?

59.Hassan drafts a marketing brochure that names three clients and describes them as investors with the firm. None of the three has consented. What about using the names?

60.Irene publishes one anonymous average return across many accounts. No client name appears, and the figure cannot be tied to any single client. What about publishing that average?

61.Jonah has joined a new firm. A former colleague who works there now asks him to send the old firm's client-list file. What should Jonah do?

62.Keiko's client signs a consent allowing Keiko to share the account's tax lots with that client's accountant. The accountant then asks for the lots. What may Keiko do?

63.The night before he resigns, Lars copies client phone numbers from the firm system into a personal file. He is still employed that night. What are those copied numbers?

64.Miriam is still employed. She calls several clients and asks them to move their accounts with her to a new firm next month. What are those calls?

65.After Nabil has left his old firm, he calls a former client whose name and number are in a public directory. He does not use the old firm's files, and he has no written noncompete. What about that call?

66.Ophelia still works at her old firm. On a weekday she builds a pitch book for the firm she is joining, on the old firm's computer and during work time. What about that work?

67.On his last day Pavel takes the firm's valuation workbook, the model the team built on firm time, and says he will use it at his new job. What is that workbook?

68.On weekends Ruth runs a paid advisory service that competes with her employer. She has never told the employer about it. What should she have obtained first?

69.Soren discovers his firm is hiding a trading error from the clients who were harmed. His supervisor tells him to stay quiet out of loyalty. What should Soren do?

70.Thea stores family photos on her firm computer. She also uses that computer to run a side business the firm has not approved. Which of those uses is the violation?

71.Victor supervises an analyst and learns the analyst is quietly recruiting the firm's clients for a new firm the analyst is starting. Victor does nothing. What has Victor failed to do?

72.Willa holds a thin stock. She tells other traders a buyer is about to bid, knowing the story is false, and she sells into the rise that follows. What is that rumor?

73.Xavier controls two accounts. He has one buy a block and the other sell that same block, at a higher price, so a trade prints up. Nothing real changes in who he represents. What are those orders?

74.Yara enters one large genuine purchase for client accounts. The order is real, and the price moves up as it is filled. She spreads no rumor and prearranges no trade. What is that price impact?

75.Anton borrows and buys a stock until the available shares are gone. His stated aim is to squeeze traders who are short. What is that campaign?

76.Beatrice carries an unpaid personal credit-card balance and a payment plan with the card issuer. The debt has nothing to do with a client account. What is the professional-conduct effect of that debt, by itself?

77.A licensing form asks Conrad whether he has ever been barred by a regulator. He leaves off a prior bar. What is that omission?

78.Delia bought for herself before the client block in the same stock. She then backdates her personal ticket so the file shows it was entered after the block. What has she done?

79.After month-end, Emmett changes one valuation input on a hard-to-price holding. No new information arrived. The change makes his performance fee larger. What should he do?

80.Fiona recommends a corporate bond to a client after reading only the coupon. She has not read the covenants or the call schedule. What is missing from that recommendation?

81.Griffin's buy note rests on a spreadsheet he cannot explain. One rate drives the value, and he does not know where that rate comes from. What should he do with the model?

82.Hana's screen, run on current data, returns forty names. She reads the filings of the three she recommends and does not recommend the other thirty-seven. A colleague says a screen can never be a basis. What can her process be?

83.Isaac writes in a client note, as a fact, that the shares will be worth 40. He does not say this is his opinion or what would have to happen. What should he do with that sentence?

84.Juliet's buy works only if a rumored takeover happens. Her note never says that, and readers see an ordinary valuation write-up. What should the note disclose?

85.Karim dates a report today. The price and the financials in it are from last year, and nowhere does the report say so. What should he do with those figures?

86.Leona's name is on a group note. She believes the earnings forecast in it was invented and is unsupported. The group will not change the number. What should she do?

87.Every morning Malik forwards a third-party research note to clients. No one at his firm has reviewed how that provider builds its calls. What should happen before he relies on the notes?

88.Nora's client letter quotes an expected return for a strategy and never says the strategy lost money in two of the last five years. What should the letter include?

89.Otto leaves for a new job on Monday. He wants the filing notes and models on the six issuers he covers so he can use them that first morning. What should happen to those research files?

90.Petra writes a procedure that says she will review the exception report every week. She never reads the report. A colleague says the written procedure is the supervision. What is missing?

91.On Monday Rafael finds that an advisor has been overcharging a client. He plans to mention it at a quarterly meeting three months away. What should he do instead?

92.Selene reviews exception reports every week and writes down each review. A subordinate hides a fraud that those reports could not reasonably have shown. What is Selene's position?

93.Tomas keeps a second set of client policy statements at home, marked for convenience, besides the files at the firm. What should happen to the home set?

94.Last quarter Una was warned that a subordinate had traded on a tip. She did not restrict him, and he kept placing trades. What responsibility does Una have?

95.Local law requires Vincent's firm to keep client records for seven years. The firm's habit is to delete them after three years. How long should he keep them?

96.Wanda's home office allows gifts up to 200. Her client lives where the gift limit is 50. She wants to give that client a gift of 120. Which limit does she follow?

97.No statute covers the gift Anders wants to accept from an issuer. Local custom is to accept a gift of that size. His professional duty is tighter than that custom. What should he follow?

98.Bridget enters a personal order and a client block in the same security. Her personal order is filled first, at a better price than the block. What should she do with that fill?

99.Cyrus directs every trade in his spouse's account. He wants that account filled ahead of client orders in the same security. How is the spouse's account treated for priority?

100.Daphne's parents have fee-paying accounts at her firm and are clients under the advisory agreement. On a limited fill she wonders whether to put them last, or ahead of unrelated clients. What priority do those family accounts have?

101.Ellis recommends a fund that his firm also manages. The client does not know the firm earns a management fee on that fund. What should Ellis tell the client?

102.Freya knows a report her firm is about to publish uses stolen information. She cannot stop the publication, and senior people refuse to fix it. What should she do?

103.Graham is enrolled for the exam and has not been awarded the charter. He says the conduct rules do not bind him yet, then trades on a confidential issuer tip. What about that timing?

104.Hattie has material nonpublic information and is about to trade. A compliance officer tells her to go ahead because everyone does it. What is her position?

105.Idris receives material nonpublic information about a takeover. He does not buy. He asks research to publish a bullish note so clients will buy before the announcement. What is that request?

106.Joelle explains that one broker charges more than the desk she would otherwise use. The client then asks, in writing, that the account's trades go to that higher-cost broker. What may she do?

107.The week a client complains about an allocation, Khalid deletes the instant messages that discussed how the shares were handed out. The firm's record rule still covers those messages. What should he have done?

108.Lucia's performance chart uses a benchmark she selected after the period ended, because the strategy beat it. The chart does not say when she picked it. What should she do?