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CFA Level I · CFA Level I Exam

Code of Ethics and Standards of Professional Conduct for CFA Level 1

The Code of Ethics and Standards of Professional Conduct is the CFA Institute's set of principles and seven Standards (I to VII) that govern members and candidates. To solve questions, identify the facts, name the Standard that applies, and pick the option that best matches its official wording and required action.

What this chapter covers

This chapter covers the Code of Ethics and the seven Standards of Professional Conduct: 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. Each Standard has a short official statement. Exam questions test whether you can apply it to a short case.

The chapter has no heavy maths. It tests judgement and precise reading. You are given a stem with three choices, and you must find the action that best complies with the Standards. Two options usually look reasonable. The difference is often one detail, such as whether the person disclosed, acted on the information, or told the right party.

Ethics also links to the rest of the paper. Standard V connects to equity valuation, fixed income and portfolio work, because research must have a reasonable basis. Standard III(C) on suitability links to Portfolio Construction and the investment policy statement. Standard III(B) on fair dealing and Standard VI on conflicts appear whenever a case involves clients, trades or compensation. Standard II(A) on material nonpublic information links to equity markets and market efficiency.

Ethical and Professional Standards carries a topic weight of 10-15% for the 2027 curriculum, one of the largest of any topic. It is also a topic where careful reading and rule recall convert directly into correct answers, with no calculator work. Because there is no minimum passing score per topic, strong ethics marks can offset weaker areas elsewhere. Candidates who skip it as 'common sense' lose easy marks, since the answers follow the official wording, not personal opinion.

Code of Ethics and Standards of Professional Conduct: topics in the order to study them

  1. 1Preamble, Code of Ethics and Adoption of the StandardsIt sets the principles and the purpose of the Standards, so every later Standard makes sense in context.
  2. 2Standard I, Professionalism: I(A) to I(D)These cover knowledge of the law, independence, misrepresentation and misconduct, and they set the baseline for all later cases.
  3. 3Standard II, Integrity of Capital Markets: II(A) and II(B)Material nonpublic information and market manipulation are short Standards with frequent, testable definitions.
  4. 4Standard III, Duties to Clients: III(A) to III(E)This is the largest group, covering loyalty, fair dealing, suitability, performance presentation and confidentiality, so give it the most time.
  5. 5Standard IV, Duties to Employers: IV(A) to IV(C)It builds on client duties by showing how loyalty to an employer is balanced against duties to clients and markets.
  6. 6Standard V, Investment Analysis, Recommendations, and ActionsStudy it after client and employer duties, since it covers diligence, communication and record retention in daily work.
  7. 7Standard VI, Conflicts of Interest: VI(A) to VI(C)Disclosure, priority of transactions and referral fees draw on ideas from earlier Standards, so they fit best late.
  8. 8Standard VII, Responsibilities as a CFA Institute Member or CandidateIt is short and covers the conduct of the programme and use of the designation, so finish with it and revise it quickly.

How to prepare Code of Ethics and Standards of Professional Conduct

Treat this chapter as a rule-application skill, not a memory dump. Learn each Standard's official wording, then practise applying it to short cases.

  1. Read the Preamble and Code of Ethics once, and note the six principles in your own words.
  2. For each Standard, write its name, its core duty and two or three required actions on one flashcard line.
  3. Learn the exact terms the Standards depend on, such as material information, nonpublic information, reasonable basis, and fair dealing.
  4. After each group of Standards, do case-style questions and name the Standard before you look at the options.
  5. For every question, eliminate the option that breaks a Standard outright, then compare the remaining two for the more complete or more proactive action.
  6. Keep an error log that records the Standard and the detail you missed, and review it weekly.
  7. In the final week, mix ethics questions with other topics, and reread the Standards text, not just your notes.

Common mistakes in Code of Ethics and Standards of Professional Conduct

  • Answering from personal opinion or workplace habit instead of the Standards

    Fix: Name the Standard first, recall its wording, and choose the option that matches it, even if it feels strict.

  • Confusing similar Standards, such as I(C) misrepresentation with V(B) communication, or III(A) loyalty with IV(A) loyalty

    Fix: Note who the duty is owed to in each Standard, and match the key fact in the case to that party and duty.

  • Choosing an option that is only partly compliant

    Fix: Check each option for the full required action, and prefer the one that both stops the problem and meets the duty.

  • Missing the key detail in the stem, such as whether information is material or nonpublic

    Fix: Underline the facts, ask whether each definition is met, and only then apply the Standard.

  • Leaving ethics until the last week

    Fix: Study it early in short regular sessions, and revisit it through mixed practice to keep the wording fresh.

Last-day revision: Code of Ethics and Standards of Professional Conduct

  • The 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, VII Responsibilities as a CFA Institute Member or Candidate.
  • Comply with the stricter of applicable law and the Standards (Standard I(A), Knowledge of the Law); if the Standards are stricter, follow them.
  • Standard I(C) bars misrepresentation, and I(D) bars conduct involving dishonesty, fraud or deceit.
  • Standard II(A): do not act or cause others to act on material nonpublic information.
  • Standard III(A) is loyalty, prudence and care, and the client's interests come before your own and your employer's.
  • Standard III(B) requires fair dealing, so no client group gets favoured when recommendations or trades are made.
  • Standard III(C) requires suitability, judged against the client's objectives and constraints.
  • Standard V(A) requires diligence and a reasonable basis for any recommendation or action.
  • Standard VI(A) requires disclosure of conflicts, and VI(B) gives clients' and employers' trades priority over your own.
  • Misuse of the CFA designation or of candidacy status falls under Standard VII, so do not claim more than the facts allow.
  • When two options both look ethical, choose the one that is more direct, complete and timely.

Code of Ethics and Standards of Professional Conduct practice questions

Code of Ethics and Standards of Professional Conduct in other exams

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

Code of Ethics and Standards of Professional Conduct: frequently asked questions

How many Standards are there in the CFA Code and Standards?

There are seven Standards of Professional Conduct, numbered I to VII, each with sub-parts. They sit under the Code of Ethics, which lists the overarching principles.

Do I need to memorise the exact wording of each Standard?

You need to know the core duty and its required actions closely, and the official wording helps because options often paraphrase it. Learn the key phrases rather than whole paragraphs.

How should I eliminate options in an ethics question?

Name the Standard, then remove any option that clearly breaks it. Between the last two, choose the one that fully meets the duty, such as acting and disclosing, over one that only partly does.

Is ethics worth studying if I am short on time?

Yes. Ethical and Professional Standards has a topic weight of 10-15% for the 2027 curriculum, and it needs no calculation. Steady practice can turn it into a reliable source of marks.