CFA Level I Exam · Code of Ethics and Standards of Professional Conduct

Conflicts of Interest: Standards VI(A) to VI(C) Explained

Updated 7 October 2026 · Fact-checked

Standard VI covers three duties. VI(A) requires you to make full and fair disclosure of all matters that could impair your independence and objectivity or interfere with duties. VI(B) puts clients' and employers' transactions ahead of your own. VI(C) requires disclosure of referral fees you receive or pay. Match each case to the right sub-standard.

Understand Conflicts of Interest: Standards VI(A) to VI(C)

A conflict of interest exists when your own interests, or your employer's, could cloud your judgment or loyalty to clients. Standard VI does not ban every conflict. It asks you to be open about them and to behave fairly when they arise.

Standard VI(A) Disclosure of Conflicts. Members and Candidates must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and employer. They must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively. Typical conflicts: owning shares in a company you cover, board seats, a firm that does investment banking for a company whose stock it rates, and compensation tied to recommendations. Disclosure goes to clients, prospective clients and your employer. The Standard requires disclosure. The guidance also advises avoiding a conflict where disclosure alone cannot cure it.

Standard VI(B) Priority of Transactions. Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner. The idea is simple: clients trade first, you trade after. You must not trade ahead of clients or take better prices at their expense. Personal trading is not banned. It must not disadvantage clients. Beneficial ownership covers accounts where you have a direct or indirect interest, such as some family accounts.

Standard VI(C) Referral Fees. Members and Candidates must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services. Clients can then judge whether the recommendation is biased. Disclosure should be made before the client enters into any service agreement, and it should describe the nature of the consideration or benefit.

Keep the three apart. VI(A) is about the existence of conflicts, VI(B) is about the order of trading, and VI(C) is about payments for referrals. Many questions test whether you pick the right one.

Key formulas to remember

Standard VI(A) Disclosure of Conflicts: Make full and fair disclosure of all matters that could reasonably be expected to impair independence and objectivity or interfere with duties to clients, prospective clients, and employer.; Disclosures must be prominent, in plain language, and communicate the information effectively. Applies to all three recipient groups.
Standard VI(B) Priority of Transactions: Client and employer transactions come before transactions in which you are the beneficial owner.; Personal trading is allowed if clients are not disadvantaged. Front-running breaches this.
Standard VI(C) Referral Fees: Disclose to employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for recommending products or services.; Covers fees paid and received. Disclose before the service agreement is entered into.

How to solve Conflicts of Interest: Standards VI(A) to VI(C) questions

Use this sequence for any Standard VI question.

1Read the stem and find the conflict: personal holdings, employer relationships, or payment for a referral.
2Decide which sub-standard fits: a conflict existing (VI(A)), the order of trades (VI(B)), or compensation for referrals (VI(C)).
3Ask who must be told: clients, prospective clients, employer, or all.
4Check whether the action puts the analyst's or firm's interest ahead of clients, such as trading first.
5Check whether disclosure was made, was timely, and was clear. Silence or vague wording usually fails.
6Eliminate options that ban all conflicts or all personal trading, since the Standards require disclosure and priority, not prohibition.
7Pick the option that discloses properly or restores client priority.

Quickest way: Three-question filter

When to use it: Use when you have about 90 seconds and the stem is a short scenario.

Is money or a benefit changing hands for a referral? Think VI(C).
Is the member trading for self and clients at the same time? Think VI(B): clients first.
Is there any interest that could bias advice? Think VI(A): disclose to all affected parties.
Discard the option that does nothing, and the option that is extreme, such as quitting or stopping all personal trades.

Common mistakes in Conflicts of Interest: Standards VI(A) to VI(C)

Thinking conflicts of interest must always be avoided.
The word conflict sounds like a violation.
Fix: The Standards require disclosure, and avoidance where appropriate. A properly disclosed conflict is usually acceptable.
Disclosing only to clients and forgetting the employer.
Students focus on client protection.
Fix: VI(A) covers clients, prospective clients and employer. VI(C) applies to employer, clients and prospective clients as appropriate.
Believing VI(B) bans personal trading.
Priority of transactions is read as a prohibition.
Fix: Personal trades are allowed. Client and employer trades must go first and clients must not be harmed.
Applying VI(C) only to fees received.
Referral fee suggests income.
Fix: Fees paid to others for referrals must be disclosed too.
Choosing VI(A) when the case is about trade order.
Both involve personal interest.
Fix: If the facts compare when client and personal trades are executed, the answer is VI(B).

Worked examples

Example 1

An analyst at a brokerage firm covers a listed manufacturer. She personally owns shares in the manufacturer and is about to publish a Buy rating. According to the CFA Institute Standards, what should she do? A. Nothing, since personal holdings are private. B. Disclose the holding to her employer and in the report. C. Disclose the holding only to clients and not to her employer.

Show the solution

The facts show a personal interest that could affect objectivity. That points to Standard VI(A).
VI(A) requires full and fair disclosure of matters that could impair independence and objectivity, to clients, prospective clients and employer.
Option A fails because it discloses nothing.
Option C fails because it leaves out the employer, and VI(A) requires disclosure to the employer as well as to clients and prospective clients.
Option B matches the required disclosure.

Answer: B

Example 2

A portfolio manager plans to buy a stock for her own account. Her firm's clients also have a pending buy order in the same stock that has not been executed. What should she do? A. Buy for her own account first, then execute client orders. B. Execute the client orders first, then trade for herself. C. Buy for her own account at the same time as the client orders, allocating shares pro rata.

Show the solution

The issue is the order of transactions, so Standard VI(B) applies.
VI(B) says client and employer transactions have priority over transactions in which she is the beneficial owner.
Option A is front-running and breaches the priority rule.
Option C looks fair because of the pro rata split, but it puts her own order alongside the clients' orders. Her purchase competes with theirs and can move the price against them, so clients do not have priority.
Option B puts clients first without banning her own trade.

Answer: B

Exam tips

Read the verb in the stem: disclose, trade first, or pay a referral. That verb points to VI(A), VI(B) or VI(C).
Wrong options often go to extremes: ban all trading, refuse all fees, or hide the conflict. Eliminate these first.
For VI(C), check that the disclosure goes to the client before services are agreed, and that it describes the benefit.
Cross-check with Standard I(B) on independence and IV(B) on additional compensation, since cases can overlap.
With no penalty for wrong answers, always pick a letter, but use these cues to narrow to two first.

Practice questions from Code of Ethics and Standards of Professional Conduct

Conflicts of Interest: Standards VI(A) to VI(C) in other exams

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

Conflicts of Interest: Standards VI(A) to VI(C): frequently asked questions

What is the difference between disclosure of conflicts and priority of transactions?

VI(A) is about telling clients, prospective clients and your employer about any interest that could impair your independence or duties. VI(B) is about trade order: client and employer trades must come before your own. One is about information, the other about conduct.

Do I have to disclose referral fees even if the client did not ask?

Yes. Standard VI(C) requires you to disclose any compensation, consideration or benefit received from or paid to others for recommending products or services. The client should be able to evaluate any bias in the recommendation, and disclosure should come before the service agreement.

Can a CFA charterholder trade for a personal account?

Yes. Standard VI(B) does not prohibit personal trading. It requires that clients' and employer's transactions take priority, so personal trades must not disadvantage clients.

Who must receive conflict disclosures under VI(A)?

Clients, prospective clients and the employer. The disclosures must be prominent, in plain language and effective at communicating the relevant information.