CFA Level I Exam · Guidance for Standard I: Professionalism

Standard I(A) Knowledge of the Law for CFA Level I

Updated 7 October 2026 · Fact-checked

Standard I(A) requires you to understand and comply with all applicable laws, rules and regulations, including the Code and Standards. When laws conflict, follow the stricter one. If you know of a violation by others, dissociate from it and consider reporting it. Exam answers usually pick the stricter rule and a firm, documented response.

Understand Standard I(A) Knowledge of the Law

Standard I(A) is the first rule in the Professionalism group. Its official wording says members and candidates must understand and comply with all applicable laws, rules and regulations of any government, regulatory organization, licensing agency or professional association governing their professional activities. This includes the CFA Institute Code of Ethics and Standards of Professional Conduct. You must also not knowingly participate or assist in, and must dissociate from, any violation of such laws, rules or regulations.

The duty has two parts. First, you must know the rules that apply to you and follow them. Second, you must not take part in other people's violations. Ignorance is not a defence. You are expected to learn the rules that cover your work, your clients and the places where you operate.

Rules can conflict. Your home country, the client's country and the Code and Standards may say different things. The Standard gives a simple answer: comply with the stricter law, rule or regulation. If the law is stricter than the Code and Standards, follow the law. If the Code and Standards are stricter than the law, follow the Code and Standards. Where local law is weaker, you cannot use it as an excuse. Where local law is stricter, you cannot use the Code as an excuse.

If you know of a violation by others, you must dissociate from it. You must also not knowingly help. Dissociation can include ceasing work on the matter, refusing to work on it or removing your name from documents. Merely stopping your own part is not always enough, because staying passively associated may be seen as participation. The Handbook's recommended procedures and guidance say that you should also encourage your firm to bring in a compliance process, and that confronting the wrongdoer or reporting to a supervisor or compliance is often the sensible step. The Handbook says that reporting a violation to the relevant authority is not required by the Standard, but may be appropriate and is encouraged. If the violation continues, dissociation may include leaving the firm.

If you suspect a violation but are unsure, you should seek advice from your compliance department or legal counsel. Members must understand the laws that apply to them, and failing to know them is not a defence. Separately, whether you are responsible for knowing about other people's violations is judged on what you knew or should have known.

Key formulas to remember

Stricter-rule principle: Follow the stricter of: applicable law, or the Code and Standards; If law is stricter, follow the law. If the Code and Standards are stricter, follow them. Where no law exists, follow the Code and Standards.
Response to others' violations: Dissociate – this is required when you know of a violation; Dissociation can include ceasing work on the matter and, if the violation continues, may include leaving the firm. Passive continued association may be seen as participation, so staying involved while merely disapproving is not enough.
Reporting: Reporting to authorities is encouraged, not required by I(A); Reporting to a supervisor or compliance is a common first step. The Standard does not make external reporting mandatory, though local law may.
Scope of laws covered: Laws, rules and regulations of governments, regulators, licensing agencies and professional associations; Includes the Code and Standards themselves, and applies to your professional activities.

How to solve Standard I(A) Knowledge of the Law questions

Use this method for any Standard I(A) question. It keeps you focused on the rule being tested.

1Identify the situation: is it a conflict between rules, a violation by someone else, or a gap in your own knowledge?
2List the rules involved: local law, the other country's law, firm policy and the Code and Standards.
3If rules conflict, decide which is stricter. That is the one you must follow.
4If no law applies, the Code and Standards govern.
5If someone else is violating a rule, check whether you are participating. If so, you must dissociate.
6Look for the response that is documented and escalated, such as raising it with compliance or a supervisor.
7Reject options that rely on ignorance, on following only the weaker rule, or on ignoring the problem.
8Pick the remaining answer and confirm it names the stricter rule or a real act of dissociation.

Quickest way: Stricter rule and dissociate test

When to use it: Use this when you have about 90 seconds and the question mentions laws that differ or a colleague's wrongdoing.

Ask: are two rules in play? If yes, choose the answer that follows the stricter one.
Ask: is someone else doing wrong? If yes, choose the answer where you stop participating and escalate.
Cross out any option that says you may follow only local law when the Code is stricter.
Cross out any option that does nothing while staying involved.
If two remain, choose the one with the more active and documented step.

Common mistakes in Standard I(A) Knowledge of the Law

Following the local law because it is the law where you work, even though the Code and Standards are stricter.
Students assume law always outranks professional codes.
Fix: Compare both. The stricter rule wins, whether it is the law or the Code and Standards.
Following the Code and Standards when the local law is stricter.
Students over-focus on the CFA text because it is the exam.
Fix: Local law that is stricter must be followed. The Code does not replace it.
Thinking dissociation and reporting are the same thing.
Both relate to others' violations and sound alike.
Fix: Dissociation means stopping your own participation and is required. Reporting is a further step that is encouraged but not required by the Standard.
Believing you are safe if you did not know the law.
Students think the duty only covers deliberate acts.
Fix: You must understand the laws that apply to your work. Lack of knowledge is not a defence.
Choosing to resign immediately as the first step.
Dissociation sounds like leaving.
Fix: Start with stopping participation and escalating to a supervisor or compliance. Leaving the firm may be needed if the violation continues.

Worked examples

Example 1

An analyst based in Country X, where insider-trading rules are weaker than the Code and Standards, advises a client in Country Y. Country Y's insider-trading law applies to the advice given to the client and is stricter than the Code and Standards. Which rule should the analyst follow? A. The Country X rules, since the analyst works there. B. The Code and Standards only. C. The Country Y rules.

Show the solution

Identify the rules: Country X law (weaker than the Code), Country Y law (stricter than the Code, and applicable to the advice given to the client), and the Code and Standards.
Apply the stricter-rule principle: follow the strictest of the applicable rules.
Country Y law is stricter than the Code, and the Code is stricter than Country X law, as the stem states.
So the analyst must follow Country Y law.
Eliminate A because it follows the weakest rule. Eliminate B because the law is stricter than the Code.

Answer: C. The analyst follows the Country Y rules, because they are the strictest applicable rule.

Example 2

A portfolio manager learns that a colleague is backdating client trade tickets to hide errors. The manager is asked to approve the revised tickets. What should the manager do? A. Approve the tickets but keep a private note. B. Refuse to approve them and raise the issue with compliance. C. Approve them because the colleague is senior.

Show the solution

The activity breaches rules, so Standard I(A) applies.
The manager is being asked to take part. The manager must not knowingly participate or assist.
Dissociation requires refusing to approve the tickets.
Escalating to compliance is the sensible and documented step, though external reporting is not required by the Standard.
A and C both involve participation, so they are wrong.

Answer: B. Refuse to approve and raise it with compliance.

Exam tips

When a question mentions two countries or a law versus the Code, look for the stricter rule and choose it.
Dissociation is required. Reporting to authorities is encouraged but not required by I(A). Watch for options that overstate this.
Options that rely on not knowing the rule, or on following only the weaker rule, are almost always wrong.
Use the official wording: understand and comply, do not knowingly participate or assist, and dissociate.
If the question gives no applicable law, the answer is to follow the Code and Standards.

Practice questions from Guidance for Standard I: Professionalism

Standard I(A) Knowledge of the Law in other exams

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

Standard I(A) Knowledge of the Law: frequently asked questions

What does Standard I(A) Knowledge of the Law require?

You must understand and comply with all laws, rules and regulations that apply to your professional activities, including the Code and Standards. You must not knowingly participate or assist in violations, and you must dissociate from them.

What if local law conflicts with the CFA Code and Standards?

Follow the stricter of the two. If local law is stricter, follow the law. If the Code and Standards are stricter, follow them. If there is no applicable law, the Code and Standards apply.

What is the difference between dissociation and reporting?

Dissociation means you stop taking part in the violation and do not knowingly assist. It is required. Reporting to a supervisor, compliance or authorities is a further step that is encouraged but not mandated by I(A) itself, though local law may require it.

Does I(A) apply if I did not know the law?

Yes. You are expected to understand the rules that govern your work. If you are unsure, seek advice from compliance or legal counsel before acting.