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

Standards of Practice Handbook Overview for CFA Level I

Updated 7 October 2026 · Fact-checked

The Standards of Practice Handbook is the CFA Institute text that explains the Code of Ethics and the Standards of Professional Conduct. It gives guidance, recommended procedures and application examples. To solve questions, identify the facts, find the Standard that applies, test each option against its wording, and pick the compliant action.

Understand Standards of Practice Handbook Overview

The Code of Ethics is a short set of broad principles. The Standards of Professional Conduct are seven numbered Standards (I to VII) that turn those principles into rules of behaviour for CFA members and candidates. The Code and Standards are the rules. The Handbook is the explanation.

The Standards of Practice Handbook adds three kinds of help around each Standard: guidance (what the Standard means and how to read it), recommended procedures for compliance (what firms and individuals can do in practice), and application examples (short cases showing compliant and non-compliant conduct). It also covers the Preamble, the Professional Conduct Program and the Standards' global scope.

The structure is predictable. Each Standard is stated in its official words, then explained. The seven Standards are: I Professionalism, II Integrity of Capital Markets, III Duties to Clients, IV Duties to Employers, V Investment Analysis, Recommendations, and Actions, VI Conflicts of Interest, and VII Responsibilities as a CFA Institute Member or Candidate. Learn this map first. Every case you meet will sit under one of these headings.

The Handbook is published in editions. The exam is written to the edition CFA Institute assigns to your curriculum, so check the current Level I curriculum materials for the edition in force rather than relying on an older book or notes. Content can change between editions, so older notes can mislead.

The key skill is application, not memorising text. Questions give a short situation and ask what a member did wrong, or what they should do. You need to know the Standard's name, its core duty, and the conditions that trigger it. Where laws differ from the Standards, the stricter rule applies, and members must follow the stricter of the two.

Key formulas to remember

Seven Standards map: I Professionalism | II Integrity of Capital Markets | III Duties to Clients | IV Duties to Employers | V Investment Analysis, Recommendations, and Actions | VI Conflicts of Interest | VII Responsibilities as a CFA Institute Member or Candidate; Memorise the order and the theme of each. Most cases can be placed under one heading in seconds.
Handbook layout for each Standard: Standard text → Guidance → Recommended procedures for compliance → Application examples; Use this to remember that guidance explains the rule, procedures are suggestions, and examples are illustrations.
Law versus Standards rule: Where applicable law and the Standards differ, follow the stricter one; If the law is stricter, follow the law. If the Standards are stricter, follow the Standards. Standard I(A) deals with this.
Where the rules sit: Code of Ethics + Standards of Professional Conduct = the rules; Handbook = explanation of how to apply them; Recommended procedures are good practice, not extra Standards in themselves.

How to solve Standards of Practice Handbook Overview questions

Use the same routine for any Handbook or application question. It keeps you from reacting to the story instead of the rule.

1Read the last line of the stem first so you know whether you must find the violation, the compliant action, or the best response.
2Read the facts and mark who did what, for whom, and whether the person is a member or candidate.
3Place the case under one of the seven Standards, then narrow to the specific sub-standard.
4Recall the core duty and its conditions, using the Standard's official wording where you can.
5Test each of the three options against that duty. Remove any option that breaks the duty or goes beyond what the Standard requires.
6Check the law point: if local law and the Standards differ, the stricter one governs.
7Pick the option that is fully compliant. Between two compliant options, prefer the one that is more protective of clients and markets and more transparent.
8Re-read the stem to confirm you answered the exact question asked.

Quickest way: Name the Standard, then eliminate

When to use it: Use this when you have about 90 seconds and the case is short.

Name the Standard in your head before looking at the options.
State its duty in one phrase, such as disclose, keep confidential, or act for the client's benefit.
Cross out the option that does the opposite of that duty.
Cross out the option that is an overreaction, such as quitting or reporting where the Standard asks only for disclosure or a simple correction.
Choose the remaining option. If unsure, guess; there is no penalty for a wrong answer.

Common mistakes in Standards of Practice Handbook Overview

Treating the Handbook as a list of facts to memorise word for word.
Ethics looks like a reading section, so candidates try to learn it like a glossary.
Fix: Learn the duty behind each Standard and practise applying it to short cases. Keep the official wording for the key phrases only.
Studying from an older edition of the Handbook or outdated notes.
Used books and old summaries are easy to find and look complete.
Fix: Use the edition and curriculum readings assigned for your exam window. Check any third-party notes against the current text.
Confusing recommended procedures with mandatory Standards.
The procedures read like instructions, so they look like rules.
Fix: Remember that the Standards are the requirements. Procedures are suggested ways to comply, so an option that omits one procedure is not automatically a violation.
Choosing the most dramatic action, such as resigning or reporting, when a smaller step is enough.
Candidates assume ethics questions reward the harshest response.
Fix: Match the response to the Standard. Often the right answer is to disclose, correct, document, or seek compliance advice.
Applying local law only and ignoring the Standards.
Candidates assume that if something is legal it must be allowed.
Fix: Apply the stricter of law and Standards. Conduct can be legal and still breach a Standard.
Placing a case under the wrong Standard because of surface details.
Cases often involve several themes, such as clients, an employer and a research report.
Fix: Ask which duty is actually at stake in the final question, then match that duty to the Standard.

Worked examples

Example 1

A candidate says the Standards of Practice Handbook adds new mandatory rules beyond the Code and Standards through its recommended procedures for compliance. Which statement is most accurate? A) The recommended procedures are additional mandatory Standards. B) The recommended procedures are suggested ways to comply with the Standards, not extra Standards. C) The recommended procedures replace the Standards where they conflict.

Show the solution

The question asks about the status of recommended procedures, which is a Handbook-structure point.
Recall the layout: Standard text, guidance, recommended procedures, application examples.
The Standards are the requirements. Procedures are suggestions on how members and firms can comply.
Option A overstates their status. Option C wrongly says they override the Standards.
Option B matches the structure.

Answer: B

Example 2

A member works in a country whose securities law is less strict than the Standards on a particular duty. What should the member do? A) Follow the local law because it is the law where the member works. B) Follow the Standards because they are stricter. C) Follow whichever rule the employer prefers.

Show the solution

This is a law-versus-Standards question, linked to Standard I(A) Knowledge of the Law.
The rule: where law and the Standards differ, follow the stricter.
Here the Standards are stricter than local law.
Option A follows the weaker rule. Option C lets the employer's preference decide, which the rule does not allow.
So the member follows the Standards.

Answer: B

Exam tips

Know the seven Standards by number and theme so you can place any case at once.
Expect three-option questions that ask for the compliant action or the violation, so practise short case drills rather than reading only.
Check which Handbook edition and curriculum your exam window uses, and study from that material.
When two options look compliant, choose the one that better protects clients and market integrity and is more transparent.
Remember the stricter-rule principle for law versus Standards; it is a frequent basis for elimination.

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

Standards of Practice Handbook Overview in other exams

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

Standards of Practice Handbook Overview: frequently asked questions

What is the Standards of Practice Handbook?

It is the CFA Institute publication that sets out the Code of Ethics and Standards of Professional Conduct with guidance, recommended procedures and application examples. It explains how the rules work in real situations. Level I ethics questions are built on it.

Which edition of the Handbook should I use for CFA Level I?

Use the edition that CFA Institute assigns in the curriculum for your exam window. Editions can differ in content, so do not rely on older books or notes. Check the official curriculum before you start.

How should I study Ethics and Professional Standards for Level I?

First learn the seven Standards and their sub-standards. Then read the guidance for the duty behind each one and practise short application cases. Review wrong answers by naming the Standard you missed.

Do I need to memorise the Standards word for word?

You do not need every word, but you should know the core duty and key conditions of each Standard. Official phrases help in close calls. Applying the rule to a case matters more than reciting text.