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

Evolution and Adoption of the CFA Code and Standards

Updated 7 October 2026 · Fact-checked

The Code of Ethics and Standards of Professional Conduct are the ethical rules CFA Institute members and candidates must follow. They have been revised over time through new editions of the Standards of Practice Handbook. Members and candidates adopt them by agreeing to comply, and CFA Institute enforces them through its Professional Conduct Program.

Understand Evolution and Adoption of the Code and Standards

The Code of Ethics and Standards of Professional Conduct set the minimum ethical behaviour for everyone who holds or is working toward the CFA designation. The Code is a short set of principles. The Standards are seven numbered rules (I to VII) that turn those principles into specific duties.

The rules are not frozen. CFA Institute publishes them in the Standards of Practice Handbook, and it revises the Handbook in new editions as markets, technology and regulation change. Each edition updates guidance, examples and the application of the Standards to real situations. The Code and Standards set the duty. The Handbook provides guidance and examples for applying them, and that application is the basis for testing.

The Handbook is where you find the Standards, their guidance and the examples. A new edition does not mean you must learn a different set of principles. The core Code and the seven Standards stay recognisable. What tends to change is wording, guidance and examples. Make sure the Handbook you study is the current edition named in your curriculum, and rely on the official text for any specific change.

Adoption is about who is bound. Members and candidates are bound by the Code and Standards as a condition of membership or candidacy. Compliance is not optional. Some Standards apply only where you have the relevant role. Standard IV(C) applies to members and candidates with supervisory responsibility, who must make reasonable efforts to ensure compliance by those they supervise, including by promoting adequate compliance procedures. Standard VII(A) covers conduct as a participant in the CFA Program, such as exam security and cheating.

Enforcement is run by CFA Institute through its Professional Conduct Program. It can review conduct, investigate complaints and apply disciplinary sanctions to members and candidates. The Standards also require you to comply with the stricter of applicable law and the Code and Standards. Where law is stricter, you follow the law. Where the Code and Standards are stricter, you follow them. If applicable law prohibits compliance with the Code and Standards, you follow the law and still adhere to the Code and Standards to the extent possible. That rule is tested often.

Key formulas to remember

Law versus the Code and Standards: Comply with the stricter of applicable law and the Code and Standards; Under Standard I(A), if law is stricter you follow the law. If the Code and Standards are stricter, you follow them. If law prohibits following the Code and Standards, you follow the law and adhere to the Code and Standards to the extent possible.
Who is bound: Members + candidates = bound by the Code and Standards; Compliance is a condition of membership and candidacy. Some Standards apply only where you have the relevant role, for example IV(C) for those with supervisory responsibility. VII(A) covers conduct as a participant in the CFA Program, such as exam security and cheating.
Structure: 1 Code of Ethics + 7 Standards of Professional Conduct; The Code and Standards set the duty. The Handbook adds guidance and examples for applying them.
Enforcement route: CFA Institute Professional Conduct Program → review and possible sanctions; Enforcement applies to members and candidates, not only to their employers.

How to solve Evolution and Adoption of the Code and Standards questions

Use this method for any item-set question on how the Code and Standards are adopted, updated or enforced.

1Read the question stem first and note whether it asks about the evolution of the Handbook, who is bound, or how it is enforced.
2Scan the vignette for the person involved and decide whether they are a member, a candidate or neither.
3Identify the Standard linked to the facts, for example I(A) for law or VII(A) for CFA Program conduct.
4Check for a conflict between local law and the Code and Standards, and apply the stricter rule.
5Separate what the Code and Standards require from what a firm or regulator requires. The Code and Standards set the ethical duty, and the Handbook guides how to apply it.
6Eliminate options that say the rules are optional, apply only to members or ignore stricter local law.
7Choose the option that names the correct Standard and a compliant action.

Quickest way: Three-question check

When to use it: Use when you have under two minutes for a question on adoption or enforcement.

Ask: Is this person bound? Members and candidates are.
Ask: Which is stricter, the law or the Standards? Follow the stricter.
Ask: Who enforces? CFA Institute through its Professional Conduct Program.
Pick the option that matches all three answers.

Common mistakes in Evolution and Adoption of the Code and Standards

Believing the Standards bind only charterholders
The term CFA member sounds like it means charterholders only.
Fix: Remember that members and candidates are both bound by the Code and Standards. Some Standards, such as IV(C), apply only where the person has the relevant role. Standard VII(A) covers conduct in the CFA Program, such as exam security.
Treating a new Handbook edition as new principles
Candidates over-focus on edition numbers and try to memorise changes.
Fix: Know that the Code and seven Standards form the stable core. Editions refine guidance and examples, so rely on the official text for specifics.
Always following the Code over local law
The Code feels like the highest authority.
Fix: Apply the stricter of the two. If law is stricter, follow the law. If law prohibits following the Code and Standards, follow the law and adhere to the Code and Standards to the extent possible.
Thinking the Handbook is only background reading
Candidates assume only the Standards text matters.
Fix: The Code and Standards set the duty, but the Handbook guidance and examples show how to apply them, and that application is what gets tested. Use both.
Assuming employers alone enforce the Standards
Firms have compliance teams, which looks like enforcement.
Fix: CFA Institute enforces through its Professional Conduct Program. Employer rules are separate and may be stricter.

Worked examples

Example 1

Vignette: Priya is a Level II candidate working at an asset manager in Singapore. Local regulation on a disclosure is less strict than the Code and Standards. A colleague says only charterholders must follow the Code and Standards, and that Priya should follow the weaker local rule. Question 1: Is Priya bound by the Code and Standards? Question 2: Which rule should she follow on the disclosure? (A) Local rule, (B) Code and Standards, (C) Employer preference.

Show the solution

Priya is a candidate, and candidates are bound along with members, so the colleague is wrong.
Compare the rules. Local law is less strict, and the Code and Standards are stricter.
Standard I(A) says to comply with the stricter of applicable law and the Code and Standards.
Nothing in the facts says the law prohibits following the Code and Standards, so she follows the Code and Standards. Doing so also satisfies the weaker local rule.

Answer: Q1: Yes, she is bound. Q2: (B) Code and Standards.

Example 2

Vignette: A member of CFA Institute is accused by a client of misrepresenting investment performance. The firm's compliance officer says CFA Institute has no authority because the firm already reviewed the matter and cleared him. Question 1: Does CFA Institute have a role in reviewing his conduct? Question 2: Which statement is most accurate? (A) Only the firm may act, (B) CFA Institute may review conduct under its Professional Conduct Program, (C) Only regulators may act.

Show the solution

The person is a member, so he is bound by the Code and Standards.
CFA Institute enforces the Standards through its Professional Conduct Program, which can review conduct of members and candidates.
A firm's internal clearance does not remove CFA Institute's role, because the duty comes from membership.
Option B states this. Options A and C wrongly limit review to a firm or regulator.

Answer: Q1: Yes. Q2: (B).

Exam tips

Expect this topic to appear as part of ethics item sets, not as a stand-alone recall question. Find the person's status first: member, candidate or neither.
When law and the Code differ, pick the stricter. The one exception is where law prohibits following the Code and Standards: then follow the law and adhere to the Code and Standards as far as possible. This is the most testable rule in this area.
Do not memorise edition changes. Know the stable structure of the Code and seven Standards and apply it.
Watch for options that say the Standards are optional or apply only to charterholders. These are usually wrong.
Because there is no penalty for wrong answers, always answer, but eliminate any option that breaks a law or lowers the standard first.

Evolution and Adoption of the Code 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.

Evolution and Adoption of the Code and Standards: frequently asked questions

Which edition of the Standards of Practice Handbook should I study?

Study the current edition named in your curriculum. In general, new editions refine guidance and examples while keeping the Code and seven Standards as the core. Use the official text for exact changes and focus on applying the Standards to case facts.

Who must follow the CFA Code and Standards?

CFA Institute members and candidates must follow them. Compliance is a condition of membership and candidacy. Some Standards, such as IV(C), apply only where the person has the relevant role, for example supervisory responsibility.

How does CFA Institute enforce the Standards?

It enforces them through its Professional Conduct Program, which can review conduct and apply disciplinary sanctions to members and candidates.

What if local law is different from the Code and Standards?

Comply with the stricter of the two. If the law is stricter, follow the law. If the Code and Standards are stricter, follow them, as set out in Standard I(A). If law prohibits following the Code and Standards, follow the law and adhere to the Code and Standards to the extent possible.