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

CFA Duties to Clients: Standards III(A) to III(E)

Updated 7 October 2026

Standard III sets your duties to clients: act with loyalty, prudence and care (A); deal fairly with all clients (B); make suitable recommendations based on client circumstances (C); present performance fairly, accurately and completely (D); and keep client information confidential (E), except for legal need, illegality, client permission or a CFA Institute Professional Conduct Program request.

Understand Duties to Clients: Standards III(A) to III(E)

Standard III covers how you treat the people whose money or trust you hold. Clients come first. Client interests come before both your employer's interests and your own.

III(A) Loyalty, Prudence and Care. Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. You must act for the benefit of clients and place their interests before your employer's or your own. Client interests come before both employer and own interests. The guidance to this Standard also covers areas such as voting proxies in a way that serves the client where you have that responsibility, and soft-dollar or brokerage arrangements. Follow the client's mandate and keep the client's interests as the test for every action.

III(B) Fair Dealing. You must deal fairly and objectively with all clients when providing investment analysis, making recommendations, taking investment action or engaging in other professional activities. Fair does not mean equal. You may offer different service levels, if you disclose them and they do not harm other clients. The key tests are about timing and allocation. Do not give some clients a recommendation change before others. Allocate trades by a pre-set policy, such as pro rata, not by who is favoured. Block trades and IPO allocations should follow written policy.

III(C) Suitability. When you are in an advisory relationship, you must make a reasonable inquiry into the client's investment experience, risk and return objectives, and constraints before advising or acting, and reassess regularly. You must judge suitability in the context of the total portfolio, not each holding alone. Where you manage to a mandate, actions must be consistent with the stated mandate.

III(D) Performance Presentation. You must make reasonable efforts to ensure performance information is fair, accurate and complete. You cannot claim more than the facts support. Do not cherry-pick the best period or best accounts. Do not state that a past result will repeat. Compliance with GIPS is encouraged, but a claim of compliance must be true.

III(E) Preservation of Confidentiality. You must keep information about current, former and prospective clients confidential unless: the information concerns illegal activities by the client; disclosure is required by law; the client or prospective client permits disclosure; or disclosure is in response to a request from the CFA Institute Professional Conduct Program. Confidentiality does not stop you from sharing information within the firm with colleagues who need it for the client's work.

Key formulas to remember

III(A) Loyalty, Prudence and Care: Client interests come before both employer interests and own interests; Act with reasonable care and prudent judgment. Guidance also covers proxy voting and soft-dollar arrangements.
III(B) Fair Dealing: Fair ≠ equal; disseminate and allocate by a policy, not favouritism; Different service levels are allowed if disclosed and not harmful to others. Release recommendation changes to all clients on a fair basis.
III(C) Suitability: Inquire (experience, objectives, constraints) → recommend in total-portfolio context → update regularly; Applies in an advisory relationship. For a managed mandate, actions must fit the mandate.
III(D) Performance Presentation: Fair + accurate + complete (reasonable efforts); No selective periods or accounts. Do not guarantee future results. Claim GIPS compliance only if true.
III(E) Confidentiality exceptions: May disclose if: (1) illegal activity by client, (2) required by law, (3) client permits, (4) request from the CFA Institute Professional Conduct Program; These are permitted exceptions, not duties in every case; disclosure required by law is the one you must follow. Sharing with colleagues who work on the account is allowed. Disclose no more than needed.

How to solve Duties to Clients: Standards III(A) to III(E) questions

Standard III questions describe a scenario and ask whether the member violated a Standard or what they should do. Use this routine.

1Identify who is affected: a client, a prospective client, or a group of clients. Duties here run to clients.
2Match the facts to a Standard. Trade allocation or early recommendation release points to III(B). Client profile or risk points to III(C). Return figures point to III(D). Client information points to III(E). Conflicting interests or mandate point to III(A).
3Recall the exact requirement for that Standard, such as 'fair, accurate and complete' or 'reasonable inquiry'.
4Compare the member's action with the requirement. Ask whether the client's interest was put first.
5Check for exceptions, such as legal need or illegality for III(E), or disclosed service levels for III(B).
6Eliminate options that overstate the rule (equal treatment, never disclose) or ignore the client.
7Choose the option that follows the Standard and, if asked for action, takes the most direct compliant step.

Quickest way: Keyword-to-Standard matching

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

Scan for the trigger word: allocate or release (III(B)), risk tolerance or profile (III(C)), track record or composite (III(D)), client details disclosed (III(E)), mandate or best interests (III(A)).
Decide violation or no violation first, from the Standard's core test.
Cross out the option that is extreme, such as 'treat all clients identically' or 'never reveal anything'.
Between the two left, pick the one that protects the client and stays within the exceptions.

Common mistakes in Duties to Clients: Standards III(A) to III(E)

Treating fair dealing as equal treatment of all clients.
The words 'fair' and 'equal' feel the same.
Fix: Remember that different service levels are allowed if disclosed and not harmful. What matters is equal opportunity to act on recommendations and non-preferential allocation.
Judging suitability holding by holding.
A single risky security looks unsuitable on its own.
Fix: Assess suitability within the total portfolio and the client's objectives and constraints. A risky position can be suitable as part of a diversified whole.
Thinking confidentiality is absolute.
Candidates remember only 'keep information private'.
Fix: Learn the four exceptions: illegal activity, legal requirement, client permission, and a request from the CFA Institute Professional Conduct Program. Sharing with colleagues who need it for the client's work is also fine.
Assuming a past-performance disclaimer fixes misleading numbers.
Candidates treat disclaimers as a cure.
Fix: III(D) requires the data itself to be fair, accurate and complete. Showing only the best accounts or periods still violates it.
Putting employer interests above clients under III(A).
Employment duties under Standard IV feel just as strong.
Fix: Under III(A), client interests come before the employer's and your own.
Skipping the update step in suitability.
Candidates think the inquiry is a one-time event.
Fix: Reassess the client profile regularly and when circumstances change, so recommendations remain suitable.

Worked examples

Example 1

An analyst at an asset manager changes her rating on a stock from Hold to Buy. She first calls three large institutional clients to tell them. She then emails the change to all other clients the next morning. Under Standard III(B), has she violated the Standard? A. No, because large clients pay higher fees. B. Yes, because clients did not receive the change at the same time as others on a fair basis. C. No, because every client eventually received the change.

Show the solution

Identify the Standard: dissemination of a recommendation change points to III(B) Fair Dealing.
Recall the requirement: deal fairly and objectively and give clients a fair opportunity to act on recommendation changes.
Compare: three clients were told first and could act before others. Others got it later.
Check exceptions: higher fees can justify different service levels, but not early access to a recommendation change at the expense of other clients.
Eliminate A (fees do not justify the advantage) and C (receiving it eventually does not remove the timing disadvantage).

Answer: B. She violated III(B) because some clients had an unfair timing advantage.

Example 2

A portfolio manager learns from a client's file that the client, a private individual, is using the managed account to conceal money obtained through fraud. What should the manager do under Standard III(E)? A. Keep the information confidential because the client relationship is private. B. Disclose the information to the client's other advisers. C. Consider disclosing the information to the appropriate authorities, since it relates to illegal activity.

Show the solution

Identify the Standard: client information and disclosure points to III(E) Preservation of Confidentiality.
Recall the exceptions: illegal activity by the client, disclosure required by law, client permission, or a request from the CFA Institute Professional Conduct Program.
Match facts: the information concerns illegal activity by the client, so an exception applies.
Test A: it ignores the exception. Test B: disclosing to other advisers is not an authorised route and not needed for the exception.
Test C: the illegal-activity exception allows disclosure to the appropriate authorities, and the manager should first consult compliance or legal counsel before acting.

Answer: C. The manager may disclose to the appropriate authorities under the illegal-activity exception, and should first consult compliance or legal counsel.

Exam tips

Tie each stem to one Standard using the trigger words. Many wrong answers cite a different Standard.
Use the official wording in your head: 'fair, accurate, and complete', 'reasonable inquiry', 'client interests first'.
Be suspicious of absolute options such as 'always', 'never' or 'identical'. Standard III rarely works that way.
Under III(C), ask whether the member inquired into the profile and considered the total portfolio before judging the action.
Remember there is no penalty for wrong answers, so eliminate two options and always pick one.

Practice questions from Code of Ethics and Standards of Professional Conduct

Duties to Clients: Standards III(A) to III(E): frequently asked questions

What is the difference between loyalty, prudence and care?

Loyalty means you put client interests ahead of your own and your employer's. Prudence means you use the judgment a careful person would use in the same situation. Care means you take reasonable diligence in managing the client's affairs. All three sit in III(A).

Does fair dealing under III(B) mean every client gets the same treatment?

No. It means you treat clients fairly and objectively. You can offer different service levels if you disclose them and they do not disadvantage other clients. Trade allocations and recommendation changes must follow a fair, non-preferential process.

What are the exceptions to confidentiality in III(E)?

You may disclose client information when it concerns illegal activity, when the law requires it, when the client or prospective client permits it, or in response to a request from the CFA Institute Professional Conduct Program. You may also share information with colleagues who need it to serve the client.

How is suitability under III(C) tested?

Questions usually check whether the member gathered the client's experience, objectives and constraints, then judged the recommendation within the total portfolio. They also test whether the profile is updated regularly. A recommendation that is consistent with a stated mandate is still judged against the client's circumstances and total portfolio, so mandate fit alone does not make it suitable.