CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

Handbook Revision on Conflicts and Application Cases for Standard VI

Updated 7 October 2026 · Fact-checked

Standard VI covers conflicts of interest in three parts: VI(A) Avoid or Disclose Conflicts, VI(B) Priority of Transactions, and VI(C) Referral Fees. To solve a case, spot the conflict, ask who must be told, check whose trades come first, and pick the answer that discloses fully and protects clients.

Understand Handbook Revision on Conflicts and Application Cases

A conflict of interest exists when your own interests, or your employer's, could cloud your judgment or work against the interests of clients or your employer. Standard VI exists because clients and employers cannot judge your advice fairly if they do not know about such conflicts.

Standard VI has three parts. VI(A) Avoid or Disclose 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 their duties to clients, prospective clients and their employer. They must ensure disclosures are prominent, delivered in plain language and communicate the relevant information effectively. VI(B) Priority of Transactions: investment transactions for clients and employers must have priority over transactions in which a member or candidate is the beneficial owner. 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.

The key difference between VI(A) and VI(B): VI(A) is about disclosure of conflicts, so people can judge for themselves. VI(B) is about order of trading, so clients are never disadvantaged by your personal trades. Disclosure alone does not fix a VI(B) breach if you trade ahead of clients.

The Handbook also gives recommended procedures. For VI(A): put policies in writing, disclose broker-dealer and other relationships, and take care with compensation and ownership. For VI(B): limit participation in IPOs and private placements (limited offerings), use pre-clearance, set blackout or restricted periods, and require reporting of personal holdings and transactions. For VI(C): disclose referral arrangements to the employer and clients before services are provided. Exam questions apply these ideas in short case scenarios.

A note on the Handbook revision: the exam is based on the Code and Standards as published in the version CFA Institute supplies for your curriculum year. Always check the Standards text in your own curriculum. Do not rely on memory of older editions, because wording and examples change between editions.

Key formulas to remember

VI(A) Avoid or Disclose Conflicts: Conflict that could impair independence, objectivity or duties → full and fair disclosure (prominent, plain language) to clients, prospects and employer; VI(A) requires disclosure to clients, prospective clients and the employer. The 'as appropriate' qualifier belongs to VI(C), not VI(A). If disclosure cannot remove the problem, avoid the conflict.
VI(B) Priority of Transactions: Client and employer trades first → personal trades after; Applies to transactions where you are the beneficial owner. Do not trade ahead of clients.
VI(C) Referral Fees: Any compensation or benefit paid or received for recommending products or services → disclose to employer, clients and prospects, as appropriate; The Standard says 'as appropriate'. Disclosing before the service is provided is the recommended procedure, so clients can evaluate the recommendation. It is not separate wording in the Standard.
Recommended procedures for VI(B): Limited participation in IPOs and private placements (limited offerings) + pre-clearance + blackout/restricted periods + reporting of personal holdings and trades; These are tools to protect client priority. They support compliance but do not replace the Standard.

How to solve Handbook Revision on Conflicts and Application Cases questions

Use this sequence for any Standard VI question. It keeps you from mixing up the three parts.

1Identify the personal or employer interest that conflicts with a client's or employer's interest.
2Decide which part applies: a conflict that affects objectivity (VI(A)), a personal trade versus client trade (VI(B)), or payment for a referral (VI(C)).
3Ask who must be told: clients, prospects, employer, or all of them.
4For VI(B), check the order: were client and employer trades completed before personal trades?
5Check if disclosure is enough or if the conflict should be avoided entirely.
6Check whether the disclosure is timely, prominent and in plain language.
7Eliminate the options that hide the conflict, delay disclosure or put the member first.
8Pick the option that discloses fully and puts clients first.

Quickest way: Three-question filter

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

Ask: is this about trade order, a referral payment, or a general conflict?
Match to VI(B), VI(C) or VI(A).
Choose the option that discloses to the right parties and puts clients first.
Drop any option that relies on the client not noticing or on disclosure after the fact.

Common mistakes in Handbook Revision on Conflicts and Application Cases

Treating disclosure as a cure for trading ahead of clients under VI(B).
Students remember that VI(A) is about disclosure and apply it everywhere.
Fix: For VI(B), the issue is order of trades. Client and employer trades must come first.
Disclosing only to the employer and not to clients.
Students think the employer's approval is enough.
Fix: VI(A) requires disclosure to clients, prospective clients and the employer. VI(C) requires disclosure of referral compensation to the employer, clients and prospective clients, as appropriate. The 'as appropriate' wording is in VI(C) only.
Disclosing a referral arrangement after the client has acted.
Students focus on whether disclosure happens, not when.
Fix: Disclose before the service is provided. This is the recommended procedure for VI(C), and it lets the client evaluate the recommendation. The Standard's own wording is 'as appropriate'.
Thinking VI(B) bans all personal investing.
The words 'priority of transactions' sound strict.
Fix: Personal trading is allowed. It just cannot disadvantage or come ahead of clients and employer.
Burying the conflict in dense legal text.
Students think any written disclosure counts.
Fix: Disclosures must be prominent, in plain language and communicate the information effectively.
Using an old edition of the Standards to answer questions.
Students rely on older notes.
Fix: Study from the Code and Standards supplied in your current curriculum.

Worked examples

Example 1

An analyst at an asset manager wants to buy shares for her personal account. Her firm is about to place a large buy order for the same stock for clients. That client order has not yet been executed. Under the Standards, what should she do? A. Buy now and disclose the trade to her employer afterwards. B. Wait until the client order has been executed before trading personally. C. Buy now if she tells the clients' portfolio manager.

Show the solution

The issue is trade order, so this is Standard VI(B) Priority of Transactions.
Client and employer transactions must have priority over personal transactions in which she is the beneficial owner.
Because the client order is still pending, any personal trade placed now would be executed ahead of it.
Option A trades first and discloses later, which breaches the priority rule.
Option C relies on telling a colleague. Pre-clearance and the order of execution govern here, not notification, so her trade would still come before the client order.
Option B puts clients first.

Answer: B. She should wait until the client order has been executed.

Example 2

A financial adviser receives a payment from a tax-planning firm for each client she sends to it. She has told her employer but not her clients. What should she do? A. Disclose the arrangement to clients before they use the firm. B. Stop telling her employer to avoid paperwork. C. Continue as is because her employer knows.

Show the solution

A payment for recommending services is covered by Standard VI(C) Referral Fees.
She must disclose to her employer, clients and prospective clients, as appropriate.
She has told the employer but not the clients, so disclosure is incomplete.
Option C is wrong because employer knowledge alone is not enough.
Option B reduces disclosure, which is the opposite of what the Standard requires.
Option A completes the disclosure and lets clients judge the recommendation.

Answer: A. She should disclose the arrangement to clients before they use the firm.

Exam tips

Match the case to VI(A), VI(B) or VI(C) first. The right answer usually follows from the label.
In VI(B) cases, the correct option almost always has clients trading first.
In VI(C) cases, look for disclosure to both employer and clients. Disclosure before the service is provided is the recommended procedure, so options that do this are usually the better choice.
Eliminate options that hide the conflict, delay disclosure or rely on only one party knowing.
Use the wording of the Standards from your curriculum, not older notes.

Practice questions from Guidance for Standard VI: Conflicts of Interest

Handbook Revision on Conflicts and Application Cases in other exams

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

Handbook Revision on Conflicts and Application Cases: frequently asked questions

What is the difference between Standard VI(A) and VI(B)?

VI(A) requires full and fair disclosure of conflicts that could impair independence, objectivity or duties. VI(B) requires client and employer transactions to take priority over your personal ones. One is about telling people, the other is about trade order.

Does Standard VI(B) forbid personal investing?

No. You may trade for yourself, but your trades must not come ahead of or disadvantage clients and your employer. Pre-clearance and blackout periods help you stay compliant.

What are the recommended procedures for Standard VI?

For VI(A), use written policies and disclose relevant relationships. For VI(B), use pre-clearance, limited participation in IPOs and private placements, blackout periods and reporting of personal trades. For VI(C), disclose referral arrangements to the employer and clients.

Which edition of the Handbook should I use?

Use the Code and Standards as supplied in your current curriculum. Editions change in wording and examples, so older notes may not match the exam.