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CFA Level I · CFA Level I Exam · Guidance for Standard II: Integrity of Capital Markets

Which outcome is most likely to result from widespread unethical conduct by market participants, according to the CFA Institute?

Widespread unethical conduct damages investor trust and so impairs the sustainability of the global capital markets. It also erodes public confidence in investment professionals and can lead to a less vibrant, smaller investment industry, harming the economy and society.

  1. ADamage to investor trust that impairs the sustainability of global capital marketsCorrect
  2. BGreater liquidity because transaction costs fall
  3. CStronger public confidence because regulators respond

Explanation

The text says unethical conduct can damage investor trust and thereby impair the sustainability of global capital markets, and has eroded public confidence in investment professionals. Options B and C describe benefits that the text does not link to misconduct.

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