Ethics Reading 1 Qbank Quiz

Which of the following statements about legal and ethical standards is most accurate? A)Some illegal acts are considered ethical. B)Unethical acts are always illegal. C)Illegal acts are always unethical.

A) Some illegal acts are considered ethical. Explanation Some illegal acts, such as acts of civil disobedience, are considered ethical by many people. All unethical behavior is not necessarily illegal. (Study Session 1, Module 1.1, LOS 1.g) Related MaterialSchweserNotes - Book 1

Which of the following statements about a code of ethics is most accurate? A code of ethics: A)does not need to include standards of conduct. B)must include principles-based standards of conduct. C)must include rules-based standards of conduct.

A) does not need to include standards of conduct. Explanation A code of ethics may include standards of conduct, but does not require them. (Study Session 1, Module 1.1, LOS 1.b) Related MaterialSchweserNotes - Book 1

A framework for ethical decision making is most appropriately applied to: A)determine whether actions are legal. B)aid decision makers in considering alternatives and their potential impacts. C)reduce the need to maintain a large compliance department.

B) aid decision makers in considering alternatives and their potential impacts. Explanation A framework for ethical decision making is a way to help decision makers consider alternatives and their impact on stakeholders. (Study Session 1, Module 1.1, LOS 1.h) Related MaterialSchweserNotes - Book 1

An ethical decision-making framework: A)primarily addresses compliance with regulatory issues. B)considers alternative actions and unintended consequences. C)focuses on the near term impact on all stakeholders.

B) considers alternative actions and unintended consequences. Explanation An ethical decision-making framework is designed to ensure that alternative actions and potential unintended consequences of decisions are considered. (Study Session 1, Module 1.1, LOS 1.h) Related MaterialSchweserNotes - Book 1

A requirement that investment professionals act in the best interests of their clients is a: A)suitability standard. B)fiduciary standard. C)fair dealing standard.

B) fiduciary standard. Explanation A fiduciary standard requires professionals to use their knowledge and expertise to act in the best interests of their clients. (Study Session 1, Module 1.1, LOS 1.e) Related MaterialSchweserNotes - Book 1

CFA Institute Standards of Professional Conduct are most accurately described as being based on: A)the best interests of members and candidates. B)accepted legal standards. C)a code of ethics.

C) a code of ethics. Explanation The Standards of Professional Conduct are based on principles stated in the CFA Institute Code of Ethics. (Study Session 1, Module 1.1, LOS 1.g) Related MaterialSchweserNotes - Book 1

Ethics least likely refers to: A)the study of good and bad behavior. B)moral principles to guide behavior. C)a person's beliefs about right and wrong behavior.

C) a person's beliefs about right and wrong behavior. Explanation An individual's beliefs are not ethics as it is used in the Level I CFA curriculum. Ethics are described as commonly accepted principles of good and bad behavior and the study of good and bad behavior. (Study Session 1, Module 1.1, LOS 1.a) Related MaterialSchweserNotes - Book 1

Which of the following characteristics distinguishes a profession from an occupation? Members of a profession: A)are better compensated for their services. B)view their work as a calling. C)abide by a code of ethics.

C) abide by a code of ethics. Explanation One of the defining characteristics of a profession according to the Level I CFA curriculum is that its members agree to abide by a common code of ethics. (Study Session 1, Module 1.1, LOS 1.c) Related MaterialSchweserNotes - Book 1

Which of the following statements about legal and ethical standards is most accurate? A)Ethical standards are a subset of legal standards. B)Legal standards are a subset of ethical standards. C)Ethical and legal standards often intersect, but not always.

C)Ethical and legal standards often intersect, but not always. Explanation Ethical and legal standards are not subsets of each other. Some actions that are legal might not be ethical, and some actions that are ethical might not be legal. (Study Session 1, Module 1.1, LOS 1.g) Related MaterialSchweserNotes - Book 1

Ethics are most accurately defined as: A)a belief about proper conduct. B)a written code of standards. C)the study of moral principles.

C)the study of moral principles. Explanation Ethics refers to the study of moral principles. Ethics is broader than written codes of standards or a particular belief about proper conduct. (Study Session 1, Module 1.1, LOS 1.a) Related MaterialSchweserNotes - Book 1

Unethical behavior by a financial professional harms: A)only clients and other employees. B)only clients. C)clients, other employees, and society.

Explanation By reducing trust in the financial services profession, unethical behavior can harm clients, other financial services employees, and society, by increasing the perceived risk of investing, increasing the cost of capital, and affecting the allocation of capital for the entire economy. (Study Session 1, Module 1.1, LOS 1.d) Related MaterialSchweserNotes - Book 1

Challenges to ethical behavior are most likely to arise from: A)inadequate training. B)internal motivations. C)situational influences.

Explanation Situational influences, which are factors external to a decision maker, are the most likely source of challenges to ethical behavior. (Study Session 1, Module 1.1, LOS 1.f) Related MaterialSchweserNotes - Book 1

Establishing standards of ethical behavior and monitoring professional conduct are best described as ways that professions: A)increase the market value of their services. B)avoid regulatory scrutiny. C)establish trust.

Explanation Ways that professions establish trust include requiring high standards of expertise, knowledge, and skill; establishing standards of ethical behavior; monitoring professional conduct; encouraging continuing education to maintain and increase competence; being focused on clients' needs; and mentoring and inspiring others in the profession. (Study Session 1, Module 1.1, LOS 1.c) Related MaterialSchweserNotes - Book 1

Standards of conduct are most accurately described as: A)a necessary part of any ethical code. B)giving members of a group a minimum level of acceptable behavior. C)providing the public with the values and general expectations for a group of professionals.

B) giving members of a group a minimum level of acceptable behavior. Explanation Standards of conduct address specific minimum levels or expected behavior in various circumstances, while a code of ethics communicates provides the values and general expectations for professional behavior. A code of ethics does not necessarily include standards of conduct. (Study Session 1, Module 1.1, LOS 1.c) Related MaterialSchweserNotes - Book 1

A profession is most accurately described as an occupational group that requires its members to: A)serve the wider community. B)have specialized expert knowledge. C)put client interests first.

B) have specialized expert knowledge. Explanation A profession is an occupational group (e.g., doctors or lawyers) that has requirements of specialized expert knowledge, and often a focus on ethical behavior and service to the larger community or society. While many professions require their members to put clients first or encourage them to serve the wider community, these are not defining characteristics of a profession. (Study Session 1, Module 1.1, LOS 1.c) Related MaterialSchweserNotes - Book 1

A code of ethics: A)should not be used for marketing purposes. B)may be rules-based or principles-based. C)provides the public with assurance of a minimum level of ethical behavior.

B) may be rules-based or principles-based. Explanation A code of ethics may be rules-based or principles-based. There can be no assurance that none of a group or professionals will violate a code of ethics. There is no requirement that a group of professionals agreeing to a code of ethics cannot be held out to the public as a positive thing for clients. (Study Session 1, Module 1.1, LOS 1.b) Related MaterialSchweserNotes - Book 1