MCQ Quiz

Question 1 of 14

A member receives a lucrative offer to advise a foreign fund using a strategy illegal in her home jurisdiction but lawful where the fund is based. She will execute trades only through the foreign market. What is the strongest Standard I(A) Knowledge of the Law conclusion?

She may proceed if the conduct is lawful in the market where it occurs and not prohibited by the stricter applicable rules governing her professional conduct.
She must refuse automatically because any strategy illegal anywhere is off-limits to CFA members.
She may proceed only if her employer prefers the arrangement.

Question 2 of 14

A research associate discovers that a performance table prepared by marketing is misleading. She did not create it, but she is asked to include it in her client presentation deck. Which action best fits Standard I(A) Knowledge of the Law?

Use the table because the misstatement originated in another department.
Use the table only for existing clients, not prospects, because they know the firm better.
Refuse to use the table and dissociate from the presentation unless the material is corrected.

Question 3 of 14

An analyst sees unusual trading in a colleague's family account and reasonably suspects insider trading, but local law does not require immediate reporting to regulators. Which first response is most appropriate under Standard I(A) Knowledge of the Law?

Escalate internally and dissociate from the activity while determining the firm's legal obligations.
Publicly accuse the colleague so the market can protect itself.
Stay silent unless regulators first request information.

Question 4 of 14

A local custom allows lavish gifts from issuers to analysts, and the practice is not expressly illegal. The member knows the gifts would compromise independence under the CFA standards. Which factor should govern the member's conduct under Standard I(A) Knowledge of the Law?

Whether the market widely accepts the custom.
Whether the gifts are taxable income under local law.
Whether the stricter ethical rule would treat acceptance as improper.

Question 5 of 14

A member joins a new asset class team and realizes several regulations are unfamiliar. Which preparation step best fits Standard I(A) Knowledge of the Law before she begins making recommendations?

Rely on prior general investment experience because ethics standards do not require technical legal refreshers.
Start work immediately and learn the rules only if a client asks about them.
Make reasonable efforts to understand the rules governing the new activity before acting in the role.

Question 6 of 14

A supervisor tells an analyst to ignore a newly issued exchange rule until competitors react because the rule's language may later be softened. What is the strongest Standard I(A) Knowledge of the Law reading?

The analyst may wait because ambiguous new rules are not binding until widely enforced.
The analyst should follow the supervisor unless clients are immediately harmed.
The analyst should apply the rule as written if it is currently effective and seek clarification without violating it in the meantime.

Question 7 of 14

A member suspects a client account is being used for money laundering. Applicable law is unclear about whether disclosure to outsiders is permitted. What is the most appropriate near-term step under Standard I(A) Knowledge of the Law?

Seek legal or compliance guidance while dissociating from the suspicious activity.
Immediately alert the media so the firm cannot suppress the issue.
Continue servicing the account until law enforcement gives direct instructions.

Question 8 of 14

A junior analyst is asked to summarize court testimony from a fraud case for the sales force. She knows several quoted claims in the draft are false but is told the final investment decision belongs to the brokers, not her. Which response is most consistent with Standard I(A) Knowledge of the Law?

Revise or refuse the summary because passing along known falsehoods would assist misconduct.
Send the draft because the sales force, not the analyst, would decide how to use it.
Send the draft if she attaches a note that the facts came from public proceedings.

Question 9 of 14

A member has already escalated a suspected violation internally, but the firm continues the conduct. Local law does not compel external reporting. Which action is most defensible under Standard I(A) Knowledge of the Law?

Remain involved because internal escalation satisfied the standard.
Dissociate further, including refusing assignments tied to the conduct or considering resignation if necessary.
Stay involved if the revenue at risk is material to coworkers' jobs.

Question 10 of 14

A compliance officer summarizes a new rule for the investment team, but the summary omits a restrictive condition found in the regulation itself. A manager notices the omission. Under Standard I(A) Knowledge of the Law, what should the manager do?

Follow the compliance memo because internal guidance is the firm's official interpretation.
Use the omitted condition only if regulators later highlight it.
Follow the rule as actually written and seek correction of the internal guidance.

Question 11 of 14

A portfolio manager covers Japanese equities from London. Her firm also has tax-reporting obligations in Brazil unrelated to her work. Which legal-knowledge expectation is most accurate under Standard I(A) Knowledge of the Law?

She must master every law affecting any office of the firm worldwide.
She must understand laws directly connected to her professional responsibilities and the markets in which she operates.
She may rely entirely on compliance because she is not a lawyer.

Question 12 of 14

A member moves to a country where front-running is not expressly banned by statute, but the CFA standards are stricter than local law. Which action best fits Standard I(A) Knowledge of the Law?

Use the local-law gap because the stricter CFA standard applies only where recognized in legislation.
Avoid the practice because Standard I(A) requires following the stricter rule when the Code and Standards exceed local law.
Use the practice after written client disclosure because no statute forbids it.

Question 13 of 14

A member discovers that a local regulator allows a marketing claim the CFA standards treat as misleading. Which statement best captures Standard I(A) Knowledge of the Law?

The member may use the claim because local marketing law is the only relevant standard.
The member should avoid the claim because the stricter CFA standard still applies to members.
The member may use the claim if competitors commonly use similar language.

Question 14 of 14

A broker learns her country's market-abuse law bars a trading practice that her employer still allows under old internal policy. What should control her next step under Standard I(A) Knowledge of the Law?

Follow the firm policy until compliance formally updates the manual.
Apply the stricter law and stop participating in the practice even if the firm still permits it.
Continue the practice if clients were already told the firm uses it.

Standard I(A) - Knowledge of the Law

First Principles Thinking: the analysis turns on which rules actually apply and which are stricter

First Principles Thinking: assisting another's violation still counts

First Principles Thinking: dissociation comes before optional whistleblowing

First Principles Thinking: custom does not outrank the stricter rule

First Principles Thinking: the duty attaches when responsibilities change

First Principles Thinking: uncertainty is not permission to ignore an effective rule

First Principles Thinking: unclear law calls for guided dissociation, not passivity

First Principles Thinking: you cannot launder misconduct through a limited role

First Principles Thinking: escalation without dissociation is not enough

First Principles Thinking: internal summaries do not replace the real rule

First Principles Thinking: role-specific knowledge, not omniscience

First Principles Thinking: the Code can be the stricter rule

First Principles Thinking: common practice and permissive law do not control

First Principles Thinking: the stricter rule governs