CFA Level I Exam · Ethics and Trust in the Investment Profession

Preamble to the CFA Code of Ethics and Standards

Updated 7 October 2026 · Fact-checked

The Preamble explains why the CFA Institute Code of Ethics and Standards of Professional Conduct exist: to protect public trust in financial markets and the investment profession. The Code sets six broad principles; the Standards set seven detailed rules. To answer exam questions, match the facts to the principle or Standard that fits.

Understand Preamble to the CFA Code of Ethics and Standards

The Preamble is the opening statement of the CFA Institute Code of Ethics and Standards of Professional Conduct. It says why the rules exist. High ethical standards are critical to maintaining the public's trust in financial markets and in the investment profession. That trust is the reason the rules matter.

The Code of Ethics and the Standards of Professional Conduct are two different things. The Code is a short list of six high-level principles. The Standards are seven numbered groups of specific duties, such as Professionalism, Integrity of Capital Markets and Duties to Clients. Think of the Code as the values and the Standards as the detailed rules that apply those values.

The Code and Standards apply to CFA Institute members, including CFA charterholders, and to candidates for the CFA designation. Together they are called Members and Candidates. The rules cover a wide range of investment roles, such as portfolio managers, analysts, consultants and advisers. If you are a candidate, you are bound by them now, not only after you pass.

The Code's six components cover conduct toward the public, clients, employers, colleagues and the capital markets. A member must put the integrity of the profession and the interests of clients above personal interests. A member must also promote the integrity and viability of the global capital markets for the ultimate benefit of society.

Breaking the rules can lead to disciplinary sanctions from CFA Institute, which can affect your membership, candidacy or right to use the designation. Exam questions on this topic are usually short. They test whether you know what the Code says, how it differs from the Standards, and whom it applies to.

Key formulas to remember

Code of Ethics, component 1: 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; The broad duty of conduct toward everyone you deal with.
Code of Ethics, component 2: Place the integrity of the investment profession and the interests of clients above your own personal interests; Clients and the profession come before your personal interests. This component does not mention employers. Loyalty to your employer is a separate duty under Standard IV(A).
Code of Ethics, component 3: Use reasonable care and exercise independent professional judgment when conducting investment analysis, making recommendations, taking investment actions and engaging in other professional activities; Links to independence, objectivity and diligence.
Code of Ethics, component 4: Practice and encourage others to practice in a professional and ethical manner that reflects credit on yourself and the profession; You should also encourage others, not only behave well yourself.
Code of Ethics, component 5: Promote the integrity and viability of the global capital markets for the ultimate benefit of society; The market-integrity duty. It underlies Standard II.
Code of Ethics, component 6: Maintain and improve your professional competence and strive to maintain and improve the competence of other investment professionals; A continuing duty to learn, and to support colleagues.
Structure of the Standards: 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; Seven Standards. Learn the order, because later questions name them by number and letter.

How to solve Preamble to the CFA Code of Ethics and Standards questions

Use this method for any question that asks about the purpose, content or scope of the Code and Standards.

1Read the stem and decide what is being tested: the purpose (Preamble), a Code principle, the structure of the Standards, or who is covered.
2Ask whether the question is about a broad principle or a specific duty. Broad principles belong to the Code. Specific duties belong to a numbered Standard.
3Identify who is acting: a member, a candidate, or someone outside CFA Institute. The Code applies to members and candidates.
4Match the facts to the Code's six components. Look for the key words: integrity, clients first, independent judgment, reflect credit on the profession, capital market integrity, competence.
5Eliminate any option that puts personal gain, employer convenience or a local custom above clients and the profession.
6Eliminate options that overstate or twist the rule, such as an option claiming the Code applies only after you earn the charter.
7Pick the option that is most consistent with protecting clients, the profession and market integrity.

Quickest way: Three-filter elimination for Preamble and Code questions

When to use it: Use it when you have about 90 seconds and the question is conceptual, with three text options.

Filter 1: Does the option put clients, the profession or market integrity first? If it puts the member's own interest first, drop it.
Filter 2: Does the option match the actual Code wording, such as independent professional judgment or reasonable care? Drop options that swap in different duties.
Filter 3: Does the option fit the scope? The Code covers members and candidates, so drop options that exclude candidates.
Choose the remaining option. If two remain, pick the one closer to the Code's wording.

Common mistakes in Preamble to the CFA Code of Ethics and Standards

Treating the Code of Ethics and the Standards of Professional Conduct as the same thing.
They are printed together and often cited together.
Fix: Remember the Code has six broad principles and the Standards have seven detailed groups of duties. The Code states values; the Standards apply them.
Thinking the Code applies only to charterholders.
People link ethics to the designation and forget candidates are bound too.
Fix: Say Members and Candidates. Candidates in the program must follow the Code and Standards.
Putting the employer's interest above the client's interest.
Real jobs reward loyalty to the employer.
Fix: The Code places the integrity of the profession and the interests of clients above your own personal interests. Loyalty to your employer is covered by Standard IV(A), not by the Code's six components. Do not read the Code as ranking employers against clients.
Forgetting the capital markets duty and treating ethics as only about clients.
Client rules feel more concrete than the market-integrity principle.
Fix: Include the capital markets in your answer: the Code requires you to promote the integrity and viability of global capital markets for the ultimate benefit of society.
Mixing up the order of the Standards, for example putting Duties to Clients as Standard II.
Learners memorize titles without numbers.
Fix: Learn the order once: I Professionalism, II Capital Markets, III Clients, IV Employers, V Analysis, VI Conflicts, VII Responsibilities as a Member or Candidate.
Assuming a legal minimum is enough to meet the Code.
Candidates equate compliance with the law with ethical conduct.
Fix: The Code sets ethical principles, not only legal compliance. Standard I(A) requires members and candidates to comply with the stricter of applicable law and the Code and Standards.

Worked examples

Example 1

Which of the following is a component of the CFA Institute Code of Ethics?
A. Maximize the return earned by the employer on proprietary trades.
B. Place the integrity of the investment profession and the interests of clients above personal interests.
C. Ensure that all clients receive identical investment returns.

Show the solution

Identify what is tested: the content of the Code's six components.
Option A puts the employer's trading return first. Nothing in the Code says this, so eliminate A.
Option C is not a component of the Code. Fair dealing is covered by Standard III(B), and it means giving clients an equal opportunity to act on recommendations, not equal returns. Eliminate C.
Option B matches the second component of the Code almost word for word.

Answer: B

Example 2

A candidate in the CFA Program says the Code of Ethics and Standards of Professional Conduct will bind her only after she earns the charter. Which statement is most accurate?
A. She is correct, because the Code applies only to charterholders.
B. She is correct, because candidates are bound only by the exam rules.
C. She is incorrect, because the Code and Standards apply to members and candidates.

Show the solution

Identify who the Code covers: Members and Candidates.
Option A limits the Code to charterholders. It leaves out candidates and CFA Institute members who are not charterholders, so it is wrong.
Option B says candidates face only exam rules. Candidates must also follow the Code and Standards, and Standard VII(A) covers conduct in the CFA Program, so B is wrong.
Option C states the correct scope.

Answer: C

Exam tips

Learn the six Code components as a list of verbs: act with integrity, put clients first, use independent judgment, reflect credit, promote market integrity, improve competence. Many items test one of them.
Questions on the Preamble are usually short and concept-based. With no penalty for wrong answers, never leave one blank. Eliminate two options and answer.
Distinguish the Code from the Standards. If an option describes a specific numbered duty, it is a Standard. If it describes a broad principle, it is the Code.
Watch for options that put personal or employer interest first. These are rarely correct in any ethics question.
Memorize the order of the seven Standards, because later case questions use the numbering such as II(A) or V(B).

Practice questions from Ethics and Trust in the Investment Profession

Preamble to the CFA Code of Ethics and Standards in other exams

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

Preamble to the CFA Code of Ethics and Standards: frequently asked questions

What is the Preamble to the CFA Code of Ethics and Standards?

It is the opening statement that explains the purpose of the Code and Standards. It stresses that high ethical standards are critical to maintaining public trust in financial markets and in the investment profession. It also says who is covered and why the rules matter.

How many components does the CFA Code of Ethics have?

It has six components. They cover acting with integrity, putting clients and the profession first, using reasonable care and independent judgment, practicing ethically and encouraging others, promoting capital market integrity, and maintaining and improving competence.

What is the difference between the Code of Ethics and the Standards of Professional Conduct?

The Code is a short set of six broad principles. The Standards are seven groups of specific duties, such as Professionalism, Duties to Clients and Conflicts of Interest. The Standards show how to apply the Code in real situations.

Do CFA candidates have to follow the Code and Standards?

Yes. They apply to CFA Institute members, including charterholders, and to candidates for the CFA designation. Candidates should treat the rules as binding from the start of the program.