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

CFA Code of Ethics: Preamble and Adoption of the Standards

Updated 7 October 2026

The Preamble explains why the Code of Ethics and Standards of Professional Conduct exist: to protect investors, uphold professionalism and maintain trust in capital markets. The Code sets out six principles. Members and candidates must follow them. Firms are encouraged to adopt the Code and Standards. To solve questions, match the scenario to the right principle or role.

Understand Preamble, Code of Ethics and Adoption of the Standards

The CFA Institute Code of Ethics and Standards of Professional Conduct are the base of ethics on the exam. Before the seven numbered Standards, there are three foundations: the Preamble, the Code of Ethics and the Standards of Professional Conduct. This topic covers the first two and how the whole framework is adopted.

The Preamble gives the reason for the framework. Investment professionals hold other people's money and trust. Ethical conduct supports that trust, protects investors and keeps markets fair and open. The Code and Standards exist to promote ethical conduct, trust in the investment profession and the integrity of the global capital markets. They are not a substitute for the law or for your own judgment.

The Code of Ethics is a short list of six high-level principles. Members and candidates must:

Act with integrity, competence, diligence, respect and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession and other participants in the global capital markets.
Place the integrity of the investment profession and the interests of clients above their own personal interests.
Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions and engaging in other professional activities.
Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

A simple memory aid is to group them by who they protect: the public and clients, the profession, the markets, and your own competence. Question writers often take one principle and ask which one a scenario matches.

Evolution of the Standards. The Code and Standards are not fixed. CFA Institute revises them from time to time, and the Standards of Practice Handbook is reissued in successive editions to carry the changes. Proposed revisions are reviewed by the Standards of Practice Council, a body of CFA Institute members, and are released for comment before they are adopted. Revisions respond to changes in markets, technology and practice. Editions of the Handbook update guidance and examples as needed. The exam tests the version in the current curriculum.

Adoption of the Code and Standards. The framework applies to CFA Institute members and candidates, who must comply. The Handbook's guidance on adoption is that firms are encouraged to adopt the Code and Standards, and should consider them when they develop their own policies and procedures. Adoption is voluntary. A firm that adopts them supports an ethical culture and gives its staff a clear benchmark for conduct.

Key formulas to remember

Purpose of the Preamble: Preamble = why ethics matter: protect investors, support trust in markets; It gives the reason for the Code and Standards. It does not list the rules itself.
Six components of the Code of Ethics: Act ethically with all parties | Clients before self | Reasonable care and independent judgment | Reflect credit on the profession | Promote market integrity | Maintain and improve competence; Learn them as six principles. The wording of the full text is longer, so recognize the theme.
Who must comply: Members and candidates must comply; firms are encouraged to adopt; Do not say firms are legally bound by the Code just because they adopt it voluntarily.
Code vs Standards: Code = broad principles; Standards = specific rules of conduct; The Standards are grouped into seven areas, I to VII.

How to solve Preamble, Code of Ethics and Adoption of the Standards questions

Use this method for any question on the Preamble, the Code of Ethics or adoption.

1Read the stem and decide what is being tested: purpose of the Preamble, a Code principle, the evolution of the Standards or adoption.
2Identify who is acting: a member, a candidate or a firm. Adoption rules differ for each.
3If a scenario is described, ask which Code principle it relates to: clients first, competence, market integrity, professional reputation, independent judgment or ethical treatment of all parties.
4Check each option against the exact wording of the Code. Remove options that overstate, such as saying firms are required to comply.
5Remove options that confuse the Code with the law, or that suggest personal interest can come before client interests.
6Choose the option that matches the principle and respects the role of the person acting.

Quickest way: Who, which principle, what is overstated

When to use it: Use this on 90-second ethics questions with three options where you can see a clear distractor.

Underline the actor: member, candidate or firm.
Name the Code principle in two words, for example 'clients first' or 'independent judgment'.
Cross out any option that uses absolute words such as 'always' or 'only' unless the Code says so.
Cross out any option that puts self-interest, employer interest or convenience above clients or market integrity.
Pick the remaining option and move on.

Common mistakes in Preamble, Code of Ethics and Adoption of the Standards

Saying the Preamble contains the detailed rules.
Students blend the Preamble, Code and Standards into one block of text.
Fix: Remember the order: Preamble gives the why, Code gives six principles, Standards give the specific conduct rules.
Believing firms must follow the Code and Standards.
The words 'must comply' for members get applied to firms too.
Fix: Members and candidates must comply. Firms are encouraged to adopt the Code and Standards and to consider them when developing policies.
Mixing up the Code principles with the Standards I to VII.
Both lists cover similar themes such as integrity and competence.
Fix: The Code has six principles. The Standards have seven numbered areas. Count them if a question gives a number.
Treating the Code as a replacement for the law.
Students assume ethics rules override local rules in every case.
Fix: The Code does not replace the law. Under Standard I(A) Knowledge of the Law, which sits within Standard I Professionalism, members and candidates must comply with the stricter of applicable law or the Code and Standards. They must not knowingly participate or assist in any violation of laws, rules or regulations.
Placing the employer's or own interest above clients in a Code scenario.
Real work pressure makes the commercially convenient answer feel normal.
Fix: The second principle puts client interests and the profession's integrity above personal interests. Choose that.

Worked examples

Example 1

A candidate is asked which statement best describes the role of the Preamble to the CFA Institute Code of Ethics and Standards of Professional Conduct. A. It lists the specific disciplinary sanctions for violations. B. It explains why the Code and Standards exist and the importance of ethical conduct to trust in the profession and markets. C. It sets out the detailed rules for performance presentation.

Show the solution

The question tests purpose of the Preamble.
Option A is about sanctions. That is not the role of the Preamble.
Option C is a specific rule area. Specific rules belong in the Standards, not the Preamble.
Option B matches the Preamble: it gives the reasons and context for ethical conduct.

Answer: B

Example 2

An analyst at a London asset manager recommends a fund she knows is slightly less suitable for a client because it pays her firm a higher fee. Which principle of the Code of Ethics is most directly at risk? A. Maintain and improve professional competence. B. Place the integrity of the investment profession and the interests of clients above their own personal interests. C. Promote the integrity and viability of the global capital markets.

Show the solution

Identify the facts: a recommendation shaped by fee income, not client need.
The conflict is between self or firm interest and client interest.
Option A is about skills, which is not the issue.
Option C is about market-wide integrity, not a single client recommendation.
Option B directly covers putting clients ahead of personal interests.

Answer: B

Exam tips

Know the six Code principles by theme. Questions often describe a situation and ask which principle applies.
Watch for 'firms must' wording. The Code binds members and candidates. Firms are encouraged to adopt it.
The Code is broad and the Standards are specific. If an option gives a detailed rule, it is probably about a Standard.
Questions use three options, so find the one that mentions clients first or market integrity and eliminate options that favour self-interest.
Because there is no penalty for wrong answers, always answer, even if you only narrow it to two options.

Practice questions from Code of Ethics and Standards of Professional Conduct

Preamble, Code of Ethics and Adoption of the Standards: frequently asked questions

How many principles are in the CFA Code of Ethics?

There are six components in the Code of Ethics. They cover ethical conduct with all parties, clients before self, reasonable care and independent judgment, reflecting credit on the profession, promoting market integrity and maintaining competence.

How do I remember the CFA Code of Ethics?

Group the six by theme: people you deal with, clients first, judgment, reputation, markets and competence. Then practise matching short scenarios to each theme instead of memorising full sentences.

Does the Code of Ethics apply to firms?

The Code and Standards apply to CFA Institute members and candidates. The Standards of Practice Handbook encourages firms to adopt them and to consider them when developing their policies and procedures. Adoption is voluntary, so avoid answers that say firms are required by CFA Institute to comply.

Is the Preamble tested on the exam?

Yes, it can be tested as part of Ethical and Professional Standards, which carries a topic weight of 10-15% in the 2027 curriculum. Expect questions on its purpose and on matching scenarios to Code principles.