CFA Level I Exam · Application of the Code and Standards: Level I

Applying the CFA Standards in Countries Without Securities Laws

Updated 7 October 2026 · Fact-checked

If a country has no securities laws or regulations, CFA members and candidates still must follow the Code and Standards. The Standards act as the minimum conduct required. You do not treat missing law as permission. Where law and the Standards differ, you follow the stricter one.

Understand Applying the Standards in Countries Without Securities Laws

The Code and Standards are not a legal system. They are a code of professional conduct that applies to every CFA Institute member and candidate, wherever they work. Your duty to follow them does not depend on a local regulator.

Start with Standard I(A) Knowledge of the Law. Its text says members and candidates must understand and comply with all applicable laws, rules, and regulations of any government, regulatory organization, licensing agency, or professional association governing their professional activities. The text also says that in the event of conflict between these laws, rules or regulations, they must comply with the more strict law, rule, or regulation. So the I(A) text covers conflicts between laws, not between law and the Standards.

The comparison of law against the Code and Standards comes from the Handbook's guidance on applicable law and global application. It says members and candidates must comply with the stricter of the applicable law or the Code and Standards. Where a country has no securities laws, there is nothing local to comply with, and so nothing stricter to compare. The Standards then become the governing rule. Silence in the law does not lower your duty.

Think of the Standards as a floor that travels with you. In a strict country, the law may sit above that floor, and you follow the law. In a country with no law, the floor is all there is, and you follow it. In a country with weaker law, you follow the Standards if they are stricter.

The exam tests this with short cases. A firm or a manager says, "There is no rule here, so it is fine." Your job is to spot that the Standards still apply, and pick the answer that applies them.

Key formulas to remember

No applicable law: No securities laws in the country → members and candidates must still adhere to the Code and Standards; Missing law never removes the duty. The Standards become the governing rule.
Law stricter than the Standards: Law stricter than Standards → follow the law; Handbook guidance on applicable law: follow the stricter of the law or the Code and Standards. I(A) text itself covers conflicts between laws.
Standards stricter than the law: Standards stricter than local law → follow the Standards; Complying with the law alone is not enough if the Standards demand more.
Violation of law: Know of a violation → you must dissociate from it; reporting to authorities is permitted but not required by the Standards; Under Standard I(A) guidance, you must dissociate from the activity. Dissociation can mean ceasing to participate and, where appropriate, reporting the matter to your supervisor or compliance. The Standards do not require you to report to authorities, though you may choose to. Local law or employer policy may require it.

How to solve Applying the Standards in Countries Without Securities Laws questions

Use this order for any question on conduct where local law is missing, weak or in conflict with the Standards.

1Identify the setting: is there no law, weak law, or a conflict between local law and the Standards?
2Name the Standard involved. Standard I(A) Knowledge of the Law is usually first, then the Standard the conduct touches, such as II(A), III(B) or V(A).
3Ask what the law requires. If nothing, the Standards alone govern.
4Compare the two rules. Pick the stricter one as the required level of conduct.
5Check the person's action against that stricter rule. Did they rely on 'no law' as an excuse?
6Choose the option that follows the Code and Standards, and reject the one that treats legal silence as permission.

Quickest way: Floor test for missing law

When to use it: Use it when a stem says a country has no securities laws or regulations, or the law is silent on the conduct.

Underline the phrase showing no law or a gap in law.
Ignore any option that says the person need only follow local practice or has no obligations.
Among the remaining options, choose the one that applies the Code and Standards or the stricter rule.
Confirm that the chosen option does not claim the Standards apply only when law exists.

Common mistakes in Applying the Standards in Countries Without Securities Laws

Thinking no law means no duty
Candidates link ethics to legal compliance only.
Fix: Remember the Standards bind you as a member or candidate regardless of local law.
Choosing the law whenever the two differ
The law feels like the final authority.
Fix: Choose the stricter of the law and the Standards. Sometimes that is the Standards.
Assuming Standard I(A) applies only where laws exist
The title mentions 'the Law', so it seems to need a law.
Fix: I(A) sets a duty to know and comply with applicable law, and the Code and Standards still apply when there is none.
Saying you must always report a violation to authorities
Candidates mix 'dissociate' with 'report'.
Fix: Guidance requires dissociation from the violation. The Standards do not require reporting to authorities. It is encouraged, and local law or employer policy may require it.
Treating local custom as a substitute for the Standards
A stem describes what everyone in the market does.
Fix: Common practice does not lower the Standards. Judge conduct against the Code and Standards.

Worked examples

Example 1

An analyst is posted to a country that has no securities laws or regulations. A colleague says, "Since nothing is prohibited here, you may trade your own account ahead of client orders." What should the analyst do? A. Trade ahead, because no law prohibits it. B. Follow the Code and Standards and not trade ahead of clients. C. Follow the colleague's practice, because local custom prevails.

Show the solution

Setting: no securities laws, so there is no local rule to follow or compare.
The duty to adhere to the Code and Standards still applies to the analyst as a member or candidate.
Here the analyst would be trading a personal (or employer) account ahead of client orders. That conflicts with Standard VI(B) Priority of Transactions, under which client transactions take precedence over employer and personal transactions. Putting the analyst's own interest ahead of clients also conflicts with Standard III(A) Loyalty, Prudence, and Care.
Options A and C use legal silence or custom as permission, which the Standards do not accept.

Answer: B. The Standards govern when no law exists, so the analyst must not trade personal or employer accounts ahead of clients.

Exam tips

Look for stems that say 'no securities laws' or 'no regulation'. The answer almost always keeps the Standards in force.
Reject options that say the member has no obligations or may follow local custom alone.
When law and Standards both exist, pick the stricter. Check which one that is before you choose.
Name the Standard in your head, usually I(A), then test the conduct against the specific Standard involved.
With no penalty for wrong answers, always pick one option. Eliminate the two that treat legal silence as permission.

Practice questions from Application of the Code and Standards: Level I

Applying the Standards in Countries Without Securities Laws in other exams

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

Applying the Standards in Countries Without Securities Laws: frequently asked questions

Do the CFA Standards apply if my country has no securities laws?

Yes. Members and candidates must still adhere to the Code and Standards. With no local law to follow, the Standards become the governing rule for your conduct.

What does Standard I(A) say about conflicts between law and the Standards?

The I(A) text says that when laws, rules or regulations conflict, you comply with the more strict one. The Handbook's guidance on applicable law extends this: you follow the stricter of the law or the Code and Standards. If the Standards are stricter, you follow the Standards. If the law is stricter, you follow the law.

Must I report a violation of the law to the authorities?

No. Guidance under Standard I(A) requires you to dissociate from the violation. That can mean ceasing to participate and, where appropriate, reporting to your supervisor or compliance. The Standards do not require you to report to authorities, though you may choose to. Local law or your employer's policy may require it.

How is this topic tested on the Level I exam?

Usually as a short case with three options. One option treats missing law as permission, one follows local custom, and one applies the Code and Standards. Pick the last.