Level III Core · Application of the Code and Standards: Level III

Standard I(A) Knowledge of the Law: Global Application

Updated 9 October 2026 · Fact-checked

Standard I(A) requires you to understand and comply with all laws, rules and regulations that apply to you, including the Code and Standards. When local law and the Code differ, you follow the stricter of the two. You must also not knowingly take part in or assist any violation.

Understand Knowledge of the Law: Global Application of the Code

Standard I(A) starts from a simple idea. A CFA member or candidate must know the rules that govern their work and obey them. Those rules come from three places: the law of the country or countries where you work, the rules of regulators and your firm, and the CFA Institute Code and Standards.

The hard cases arise when these sources disagree. Global clients, cross-border funds and firms with offices in several countries make this common. The Code does not ask you to pick the rule that is easiest or the one from your home country. It asks you to follow the stricter rule, meaning the one that gives clients and markets more protection or imposes more duty on you.

This gives three patterns. Where the law is stricter than the Code, follow the law. Where the Code is stricter than the law, follow the Code. Where the law permits something the Code does not, legal permission is no defence, and you must still meet the Code's higher requirement. You comply with both by meeting the higher bar.

The standard also covers other people's violations. If you know that your employer or a colleague is violating a law, rule or the Code, Standard I(A) requires you to dissociate from the activity. Dissociation means you stop taking part and do not assist. That is the required response. Other steps are recommended, not required. You may confront the wrongdoer or inform a supervisor or compliance, and you should encourage the firm to adopt compliance procedures. If the violation continues, you should consider more steps, such as a written record and, in some cases, leaving the firm. The Standard does not require you to report the violation to a regulator, but doing so is encouraged in some situations and may be required by law. Reporting is not a breach of confidentiality when the law requires it.

A related point is that you should keep up with changes in law and regulation. Ignorance is not a defence. Firms commonly have compliance staff, but relying on them does not remove your own duty to know the rules that apply to you. Where a country has no applicable law, the Code is your guide.

Key rules to remember

Stricter-rule principle: Follow the stricter of (applicable law, Code and Standards); Applies when the two differ. Comply with both by meeting the higher requirement.
Law stricter than Code: Law is stricter than the Code → follow the law; Example: a local rule demands more disclosure than the Code does.
Code stricter than law: Code is stricter than the law → follow the Code; Legal permission does not excuse a breach of the Code.
No applicable law: No law or regulation → follow the Code and Standards; The Code still binds you even where the country has no securities rules.
Known violation by others: Know of violation → dissociate (required); informing a supervisor or compliance and encouraging compliance procedures are recommended; Dissociation is the required step. Escalation is recommended. Reporting to authorities is not required by the Standard unless the law requires it.

How to solve Knowledge of the Law: Global Application of the Code questions

Use this method for any item or essay on Standard I(A) or conflicts between law and the Code.

1Identify every jurisdiction that applies: where you work, where the client lives, where the product is sold, and where the firm is based.
2List what each law or regulation requires on the point in question, then what the Code and Standards require.
3Compare them on the specific issue. Decide which is stricter, meaning which gives more client or market protection.
4State that you must follow the stricter rule. If the law is silent, the Code applies.
5Check whether anyone else is violating a rule. If so, the member must dissociate and not assist.
6Answer the command word. If asked to determine, state the violation or compliance. If asked to justify, cite Standard I(A) and the stricter-rule point in one or two sentences.

Quickest way: Two-column stricter test

When to use it: When a vignette gives a local rule and asks what the member should do.

Write Law and Code as two short phrases for the single issue.
Circle the one that demands more of the member.
Choose the answer that follows the circled rule.
Reject any option saying you can follow the weaker rule because it is legal or local custom.
If a colleague is breaking a rule, prefer the option that dissociates, not one that ignores it or only reports without stopping.

Common mistakes in Knowledge of the Law: Global Application of the Code

Following local law because it is the law where the member works.
Candidates assume law always outranks a professional code.
Fix: Compare both. If the Code is stricter, follow the Code. Legal does not mean compliant.
Following the Code when local law is stricter.
Candidates over-apply the Code as the top authority.
Fix: The stricter rule wins, and sometimes that is the law. Never break the law in the name of the Code.
Saying the member must report a violation to the regulator in every case.
The word dissociate is confused with reporting.
Fix: Dissociation is required. Reporting is encouraged in some cases and required only where law demands it.
Thinking a country with no securities law frees the member from the Code.
Candidates equate no law with no rules.
Fix: Where there is no applicable law, the Code and Standards still apply in full.
Relying on the compliance department as a complete defence.
Candidates believe approval by compliance shifts responsibility.
Fix: Members stay responsible for knowing the rules. Seeking legal or compliance advice is good practice but not a shield.
Assuming a violation by a client or firm is acceptable if the member does not benefit.
Candidates focus on personal gain.
Fix: Knowingly participating in or assisting a violation breaches the Standard even without personal benefit.

Worked examples

Example 1

A portfolio manager at a firm in Country A manages money for a client in Country B. Country B's law requires written disclosure to clients of the manager's personal holdings in recommended securities. The CFA Institute Code and Standards require full and fair disclosure of matters that could reasonably be expected to impair the manager's independence and objectivity or interfere with their duties (Standard VI(A) Disclosure of Conflicts). The manager asks whether the disclosure is needed and what form it must take. What should the manager do under Standard I(A)?

Show the solution

Identify the rules that apply to the client relationship: Country B's law requires written disclosure of personal holdings in recommended securities, and the Code requires disclosure of conflicts such as these holdings. The Code does not specify that the disclosure be written.
Compare law and Code on this issue. Both require disclosure. Country B's law adds a requirement that the disclosure be in writing, so it demands more of the manager than the Code does.
Apply Standard I(A): follow the stricter rule, which is Country B's written-disclosure requirement.
Check the Code: a written disclosure also meets the Code's requirement for full and fair disclosure, so the manager complies with both.
Conclude that giving no disclosure, or giving it only orally, would breach the law and the Standards.

Answer: The manager must disclose the personal holdings to the client in writing. Country B's law is stricter than the Code because it adds a written requirement, so the manager follows it. Meeting the law also meets the Code's disclosure requirement.

Example 2

An analyst works where local law permits a practice that the Code prohibits as a violation of the Standards. The analyst learns that a senior colleague is using that practice with client accounts. The firm's compliance head says it is legal locally. Which action is most consistent with Standard I(A)? A. Continue, because the practice is legal. B. Dissociate from the practice and not assist it, and consider escalating to a supervisor or compliance. C. Report the colleague to the local regulator immediately, as required. D. Do nothing, as compliance approved it.

Show the solution

Compare the rules: local law permits the practice, the Code prohibits it. The Code is stricter, so the practice is a violation of the Code and the analyst must follow the Code.
Check option A: legal but prohibited by the Code, so it fails.
Check option C: Standard I(A) does not require reporting to the regulator. Reporting may be encouraged in some situations or required by law, but it is not mandated by the Standard. Calling it required is wrong.
Check option D: compliance approval does not remove the member's duty to follow the stricter rule.
Option B is the best answer because it includes the required step, which is to dissociate and not assist. Escalating to a supervisor or compliance is a recommended further step, not a requirement, and it does not make B wrong.

Answer: B. The Code is stricter than local law, so the analyst must dissociate and not assist. Escalating to a supervisor or compliance is recommended, but reporting to the regulator is not required by the Standard.

Exam tips

In an item set, look for the sentence that says law and the Code differ, then answer by naming which is stricter. This is usually the whole question.
Beware options that say follow local custom or local law when the Code is stricter. They are almost always wrong.
Beware options that say the member must always report to authorities. The correct choice is usually dissociate, with reporting only where law requires or as a consideration.
In essay sets, answer a justify or determine command with the violation or compliance statement first, then one sentence naming Standard I(A) and the stricter rule. Do not write more than the command asks for.
Watch for the no-law scenario. The right answer is that the Code applies.

Knowledge of the Law: Global Application of the Code in other exams

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

Knowledge of the Law: Global Application of the Code: frequently asked questions

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

It requires you to understand and comply with all laws, rules and regulations that apply to your professional activities, including the Code and Standards. When they conflict, you follow the stricter. You must also not knowingly take part in or assist any violation.

What if local law and the CFA Code and Standards conflict?

Follow the stricter of the two. If the law is stricter, follow the law. If the Code is stricter, follow the Code. The aim is to meet both at once by meeting the higher requirement.

Do I have to report a colleague who breaks a rule?

Standard I(A) requires you to dissociate from the violation and not assist it. Reporting to authorities is not required by the Standard, though it may be encouraged in some situations or required by law. Informing a supervisor or compliance and encouraging compliance procedures are recommended steps. If the conduct continues, you should consider further steps such as leaving the firm.

Does the Code apply if my country has no securities laws?

Yes. Where there is no applicable law or regulation, you follow the Code and Standards. The absence of law does not lower your duty.