Level III Core · Asset Manager Code of Professional Conduct

General Principles of Conduct in the Asset Manager Code

Updated 9 October 2026

The General Principles of Conduct are six overarching duties in the Asset Manager Code. A manager must act professionally and ethically, act for the benefit of clients, act with independence and objectivity, act with skill, competence and diligence, communicate with clients in a timely and accurate manner, and uphold capital market rules. Match the facts to the principle breached.

Understand General Principles of Conduct

The Asset Manager Code of Professional Conduct (the Code) is a set of ethical guidelines for investment management firms. It is built around a short list of General Principles of Conduct. Every detailed provision in the Code grows out of these principles. If you know them, you can reason through a case even when you cannot recall the specific provision.

The Code is written for the firm, not the individual. The CFA Institute Standards of Professional Conduct apply to individual members and candidates. A firm can claim compliance with the Code voluntarily. This is the main difference you must remember when a question compares the two.

The six principles say that a manager must: act in a professional and ethical manner at all times; act for the benefit of clients; act with independence and objectivity; act with skill, competence and diligence; communicate with clients in a timely and accurate manner; and uphold the applicable rules governing capital markets.

Think of them as three groups of two. The first two cover character and duty to the client: ethics, and acting for the benefit of clients. The next two cover how the work is done: independence and objectivity, and skill, competence and diligence. The last two cover information and the market: communication with clients and rule compliance.

Keep the principles apart. Acting for the benefit of clients is about whose interests come first. Loyalty, prudence and care is not a headline principle. It is a detailed provision in the Code (loyalty to clients) that sits under acting for the benefit of clients, and Standard III(A) mirrors it. Independence and objectivity is about judgment free of outside influence. Skill, competence and diligence is about having the ability and doing the work properly.

In the exam, you will rarely be asked to recite the list. You will be given a firm's behaviour and asked which principle is breached, or whether the firm acted in line with the Code. Your job is to link the facts to the right principle and justify it briefly.

Key rules to remember

Principle 1: Professional and ethical: Act in a professional and ethical manner at all times; Covers honesty and integrity in all dealings. It is the broadest principle.
Principle 2: Benefit of clients: Act for the benefit of clients; Client interests come before the firm's and the manager's own interests. Loyalty, prudence and care is a detailed provision under this principle, and Standard III(A) mirrors it.
Principle 3: Independence and objectivity: Act with independence and objectivity; Decisions must not be bent by gifts, relationships or pressure.
Principle 4: Skill, competence, diligence: Act with skill, competence, and diligence; Covers proper research, adequate resources and a sound process.
Principle 5: Communication: Communicate with clients in a timely and accurate manner; Information must be both on time and correct. Late or misleading communication breaches it.
Principle 6: Market rules: Uphold the applicable rules governing capital markets; Covers laws, regulations and market integrity, including avoiding manipulation and misuse of inside information.
Code vs Standards: Code = firms, voluntary adoption; Standards = individual members and candidates, required; A common comparison question. Both aim at client-first, ethical conduct.
Memory aid: P-B-I-S-C-U = Professional, Benefit of clients, Independence, Skill, Communicate, Uphold; Use it to list all six quickly in the order above.

How to solve General Principles of Conduct questions

Use this method for any question on the General Principles. It works for item sets and for essay questions with command words such as identify, state or justify.

1Read the command word first. Identify, state, justify and determine each need a different length of answer.
2Underline the manager's action in the vignette. Note who gains and who loses: the client, the firm or an individual.
3Ask which of the six principles the action touches. Use P-B-I-S-C-U to run through them.
4Decide if the action complies or breaches. Test for client benefit first, because it resolves most cases.
5Name the principle in the exact words of the Code, for example act with independence and objectivity.
6Give one short reason that ties the fact to the principle. Do not retell the vignette.
7If the question compares the Code with the Standards, state who each applies to and whether adoption is voluntary.
8Check that you answered only what was asked, with the number of responses requested.

Quickest way: Fact, principle, reason in one line

When to use it: Use this when time is short, especially in an item set where you must pick among four options.

Skim the options for the principle names and cross out any that do not match the manager's action.
Ask one question: who benefits? If the firm or manager gains at the client's expense, choose the act-for-the-benefit-of-clients principle. Loyalty, prudence and care is a detailed provision under it, not a separate headline principle.
If the issue is gifts, pressure or a relationship clouding judgment, choose independence and objectivity.
If the issue is weak research, no process or inadequate resources, choose skill, competence and diligence.
If the issue is late or misleading reports to clients, choose communication. If it is a law or market-rule breach, choose upholding capital market rules.
For Code versus Standards, pick firms and voluntary for the Code, individuals for the Standards.

Common mistakes in General Principles of Conduct

Saying the Code applies to individual analysts
Students blend it with the Standards of Professional Conduct, which bind members and candidates.
Fix: Link the Code to firms and the Standards to individuals. Add that firms adopt the Code voluntarily.
Mixing up independence and objectivity with client benefit
Both involve conflicts, so the facts look alike.
Fix: Ask what is compromised. If judgment is clouded by outside influence, it is independence and objectivity. If the client's interest is put second, it is acting for the benefit of clients.
Treating communication as accuracy only
Students remember misrepresentation but forget timing.
Fix: Remember the wording: timely and accurate. A correct report delivered late can still be a breach.
Naming the principle without a reason
Candidates assume the label earns the points.
Fix: Add one clause linking the fact to the principle, such as the manager traded ahead of clients, so client interests came second.
Listing fewer or more than six principles
Memory slips, or students add headings that are really detailed provisions, such as loyalty, prudence and care, or Standards headings such as fair dealing.
Fix: Use P-B-I-S-C-U and count to six. Loyalty, prudence and care, fair dealing and similar ideas fall under the Code's detailed provisions, not the six headline principles.
Giving a long answer when the command word asks to identify
Students fear losing points and write everything they know.
Fix: Identify means name it. Write the principle only. Justify means add a short reason.

Worked examples

Example 1

A manager at an asset management firm accepts expensive hospitality from a broker and then routes most client trades to that broker without comparing execution quality. Which General Principle is most directly breached? A. Communicate with clients in a timely and accurate manner. B. Act with independence and objectivity. C. Uphold the applicable rules governing capital markets. D. Act with skill, competence, and diligence.

Show the solution

Identify the action: hospitality is received and then trades go to the same broker without comparing execution.
Ask what is compromised: the manager's judgment on broker choice is influenced by the hospitality.
Test option A: nothing is said about reporting to clients, so A does not fit.
Test option C: no law or market rule is mentioned, so C does not fit.
Test option D: skill and diligence is a weaker fit because the problem is the influence, not a lack of ability.
Select B: the manager's decision is not independent or objective.

Answer: B. The hospitality influenced the broker choice, so the manager failed to act with independence and objectivity. Client benefit is also at risk, but independence and objectivity is the most direct match.

Example 2

Essay-style: An asset management firm wants to claim compliance with the Asset Manager Code. A colleague says the Code binds each analyst personally, like the Standards of Professional Conduct. Identify whether the colleague is correct and justify your answer.

Show the solution

Command words: identify (give a verdict) and justify (give the reason).
State the verdict: the colleague is not correct.
Give the reason for the Code: it is written for investment management firms, and a firm adopts it voluntarily to claim compliance.
Give the contrast: the Standards of Professional Conduct apply to individual CFA Institute members and candidates.
Keep it short and tie it to the six principles only if asked.

Answer: The colleague is incorrect. The Asset Manager Code applies to firms, which adopt it voluntarily to claim compliance. The Standards of Professional Conduct apply to individual members and candidates.

Exam tips

Learn the six principles in the Code's own words. Item set options often copy that wording.
Expect scenario questions that ask which principle a firm's action breaches. Practise matching one fact to one principle.
In essays, follow the command word. Identify needs the name only. Justify needs the name plus one linked reason.
For Code versus Standards questions, give two contrasts: who is bound and whether adoption is voluntary.
When two principles seem to fit, pick the one that matches the central problem in the vignette, and do not hedge between them.

General Principles of Conduct: frequently asked questions

What are the General Principles of Conduct in the Asset Manager Code?

There are six. A manager must act in a professional and ethical manner, act for the benefit of clients, act with independence and objectivity, act with skill, competence and diligence, communicate with clients in a timely and accurate manner, and uphold the applicable rules governing capital markets.

How do I remember the asset manager code general principles?

Use P-B-I-S-C-U: Professional, Benefit of clients, Independence, Skill, Communicate, Uphold. Say it once, then expand each letter into the Code's wording. Count to six to check nothing is missing.

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

The Code is designed for investment management firms, which adopt it voluntarily. The Standards of Professional Conduct apply to individual CFA Institute members and candidates. Both stress putting clients first and acting ethically.

Where do loyalty, prudence and care fit in the General Principles?

Loyalty, prudence and care is the name of Standard III(A) in the Standards of Professional Conduct. It is not one of the Code's six General Principles. In the Code, the idea sits under the principle of acting for the benefit of clients and in its detailed provisions on loyalty to clients. Keep it separate from skill, competence and diligence, which is about ability and quality of work.