Chartered Financial Analyst (CFA) Ethics Practice Test

Scenario: A member uses inaccurate benchmark data to claim outperformance. Which CFA Institute Standard is violated?

Standard V.A Diligence and Reasonable Basis Standard VI.A Disclosure of Conflicts Standard IV.D Performance Presentation Standard IV.E Preservation of Confidentiality

Correct Answer:

Standard V.A Diligence and Reasonable Basis

Explanation:

Claims of outperformance must be supported by a diligent and reasonable basis. Using benchmark data that is inaccurate undermines the integrity of the analysis and means the performance claim isn’t based on reliable, verifiable evidence. This violates the duty to have a reasonable basis for investment analyses and recommendations, including the data and methods used to evaluate performance. Even if the presentation of performance data is covered by other standards, the core issue here is the failure to apply proper diligence to the benchmark data, which is exactly whatStandard V.A Diligence and Reasonable Basis requires.

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