Skip to content

CFA Level I · CFA Level I Exam

Application of the Code and Standards for CFA Level I

Application of the Code and Standards means taking the CFA Institute Code of Ethics and the Standards of Professional Conduct and applying them to short case facts. You name the Standard, test each action against its wording, and pick the option that complies. Where laws conflict, the stricter rule governs.

What this chapter covers

This chapter is where Ethics moves from memorising Standards to using them. You first see how the Standards of Practice Handbook is organised: the Code of Ethics, the seven Standards with their sub-parts, and the guidance and examples attached to each. You then see how the Standards work across borders, including what to do when local law and the Standards differ, and when no securities law exists at all.

The last topic is the real skill. You read a short case, spot the issue, link it to the right Standard, and judge whether the person acted properly. The same method is tested in every ethics question on the exam.

The chapter connects to the rest of the paper in two ways. Ethical and Professional Standards is a full topic area on the 2027 curriculum with a weight of 10-15%, so it is one of the larger areas. The reasoning also supports your judgement in questions elsewhere, such as research reports in Equities or performance presentation in Portfolio Construction. Each exam question has three options (A, B, C) and there is no penalty for a wrong answer, so always answer.

Ethics carries a weight of 10-15% on the 2027 curriculum, and the questions reward a repeatable method rather than heavy calculation. Candidates who learn the wording of each Standard and practise case reasoning can gain reliable marks here. Because every item is a standalone three-option question, one clean elimination step often decides the answer. It is also a topic you can revise on a phone during a commute, which suits working professionals.

Application of the Code and Standards: Level I: topics in the order to study them

  1. 1Standards of Practice Handbook OverviewStart here to learn how the Code, the Standards and the guidance fit together, so later cases have a map to follow.
  2. 2Global Application of the Code and StandardsNext, learn how the Standards apply across countries and which rule wins when local law and the Standards differ.
  3. 3Applying the Standards in Countries Without Securities LawsThis is a short extension of the global topic and covers the case where no law exists to guide you.
  4. 4Applying the Code and Standards to Case SituationsFinish with cases, because you need the Standards and the global rules in your head before you can apply them.

How to prepare Application of the Code and Standards: Level I

Ethics is learned by reading Standards closely and then practising cases. Aim for exact wording plus a fixed method.

  1. Read the Code of Ethics and the list of seven Standards until you can recall each Standard number and name without notes.
  2. For each Standard, note its sub-parts, such as II(A) Material Nonpublic Information, and write one line on what it requires in plain words.
  3. Learn the global rule: members and candidates must know and comply with applicable law, the Code and the Standards, and follow the stricter one when they conflict.
  4. Read each case slowly and underline the facts: who acted, what they did, what they knew, and who was affected.
  5. Name the Standard before looking at the options. Then check each option against that Standard and remove the two that fail.
  6. Do timed practice at about 90 seconds per question and keep a log of every miss, noting which Standard you confused.
  7. In the last week, reread your log and the Standard wordings instead of new cases.

Common mistakes in Application of the Code and Standards: Level I

  • Choosing an answer because it feels fair instead of citing a Standard.

    Fix: Name the Standard first. Pick the option that matches its wording, even if another option feels kinder.

  • Assuming local law always decides the answer.

    Fix: Remember that when law and the Standards conflict, you follow the stricter one.

  • Mixing up similar Standards, such as those on conflicts of interest and loyalty.

    Fix: Learn each Standard's core duty in one line and practise picking the best fit among close pairs.

  • Skipping the handbook structure and jumping to cases.

    Fix: Spend your first session on the overview so you know the Standards and sub-parts before you apply them.

  • Overthinking cases and adding facts that are not given.

    Fix: Use only the facts in the stem. If a fact is missing, judge on what is written.

  • Leaving ethics revision to the last days.

    Fix: Practise a few cases each week so the method becomes automatic.

Last-day revision: Application of the Code and Standards: Level I

  • The Code of Ethics and Standards of Professional Conduct apply to CFA members and candidates.
  • There are seven Standards, each with sub-parts, so cite the exact one, for example II(A).
  • If law and the Standards differ, follow the stricter of the two.
  • Know the applicable law, do not knowingly take part or assist in a violation by others, and dissociate from any violation you know of.
  • Where no securities laws exist, members and candidates must still comply with the Code and Standards.
  • Read the facts first, then name the Standard, then test every option.
  • Compliance means your action matches the Standard, not just that it seems fair.
  • Options are A, B, C only, so eliminate two and pick the remaining one.
  • There is no penalty for a wrong answer, so never leave a question blank.
  • Do not rely on memory of cases; rely on the wording of the Standard.
  • Watch for qualifiers in the facts such as material, nonpublic, client, and employer.

Application of the Code and Standards: Level I practice questions

Application of the Code and Standards: Level I in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Application of the Code and Standards: Level I: frequently asked questions

What does this chapter cover in CFA Level I?

It covers the structure of the Standards of Practice Handbook, how the Code and Standards apply globally, how to act where no securities laws exist, and how to apply the Standards to case situations. It builds the method you use in every ethics question.

What if local law and the Standards disagree?

Follow the stricter of the two. If the law is stricter, comply with the law. If the Standards are stricter, comply with the Standards.

Do I need to memorise Standard numbers?

Knowing each Standard's name and core duty matters most. Questions are scenario-based and test whether you can apply the right Standard, so knowing its wording helps you rule out wrong options quickly. Numbers such as II(A) help you organise your notes and cite the exact Standard, so learn them alongside the names.

How should I answer a case question quickly?

Read the facts, name the Standard that applies, and test each option against it. Eliminate the two that fail. You have about 90 seconds per question, so keep the process short.

Is there a penalty for guessing in ethics questions?

No. All questions are equally weighted and wrong answers carry no penalty, so answer every question even if you must guess between two options.