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Level III Core · Code of Ethics and Standards of Professional Conduct

Evolution and Adoption of the CFA Code and Standards

Updated 8 October 2026 · Fact-checked

The CFA Institute Code of Ethics and Standards of Professional Conduct are updated through new Handbook editions, and you apply the edition in your current curriculum. They bind CFA Institute members and candidates in the CFA Program. Firms are encouraged to adopt them. In questions, identify who is acting, which rule applies, and whether the law or the Code is stricter.

Understand Evolution and Adoption of the Code and Standards

The Code of Ethics and Standards of Professional Conduct are the ethical rulebook of the CFA Institute. The Code states broad principles. The Standards turn those principles into specific duties. Together they are published in the Standards of Practice Handbook, which also gives guidance and application examples.

The rules are not fixed. Markets, technology and client expectations change, so CFA Institute revises the Code and Standards and republishes the Handbook in new editions. Each revision usually refines wording, adds or sharpens guidance, and adds fresh examples. The core duties stay the same: put client and market integrity first, act with competence and diligence, and be honest. Apply the edition of the Handbook used in your current curriculum. Learn its changes from the official curriculum text, and treat them as refinements of existing duties, not a new ethical system.

The next question is who must follow the rules. The Code and Standards apply to CFA Institute members, which includes CFA charterholders, and to candidates in the CFA Program. A Level III candidate is therefore already bound. Members also confirm their compliance each year in a Professional Conduct Statement. Breaches can lead to disciplinary sanctions through the CFA Institute Professional Conduct Program. These include public censure, suspension of membership or candidacy, and revocation of the charter.

Firms are different. A firm is not a member, so the Code does not bind it directly. But firms are encouraged to adopt the Code and Standards, to build compliance procedures around them, and to make sure supervised staff follow them. A separate Asset Manager Code exists for firms that manage assets for clients. Do not confuse it with the Code that binds individuals.

Finally, adoption works alongside local law. Members and candidates must know and follow the laws that apply to them. Where law and the Code differ, they follow the stricter one. Where no law applies, the Code still governs.

Key rules to remember

Who is bound
Code and Standards apply to CFA Institute members (including charterholders) and candidates in the CFA Program
Firms are encouraged to adopt them but are not bound as members. The Asset Manager Code is a separate document for firms.
Law versus Code
Comply with the stricter of applicable law and the Code and Standards
If the law is stricter, follow the law. If the Code is stricter, follow the Code. If the law is silent, follow the Code.
Handbook structure
Handbook = Code of Ethics + Standards of Professional Conduct + guidance + application examples
The Code gives principles, the Standards give duties, and the guidance shows how to apply them.
Sanctions
Public censure, suspension of membership or candidacy, revocation of charter
Imposed through the Professional Conduct Program after a breach. Know the range, not a fixed scale.
Currency of the text
Edition to apply = the edition of the Handbook in your current curriculum
Answer using the version in the curriculum, not older versions or personal memory of past editions.

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

Use this method for any question on how the Code and Standards developed, who must follow them, or how they are adopted.

  1. 1Identify the actor: member, charterholder, candidate, firm, or supervisor. This decides which rule applies.
  2. 2Check whether the question is about the Code and Standards for individuals or about the Asset Manager Code for firms.
  3. 3Ask whether a law or regulation applies. If so, compare it with the Code and pick the stricter.
  4. 4If the question is about an edition update, recall what the update refined and tie it to the existing Standard it touches.
  5. 5Name the Standard or principle that fits the facts, and state whether there is a violation.
  6. 6If there is a violation, state the action needed: stop, disclose, correct, or put compliance procedures in place.
  7. 7In an essay set, follow the command word. For 'identify', name the item. For 'justify', add one reason tied to the facts.
  8. 8Write the answer in the fewest words that cover the rule, the facts and the conclusion.

Quickest way: Actor, law, stricter rule

When to use it: Use it for short item-set questions where you have about two minutes per question.

  1. Underline who is acting: member, candidate or firm.
  2. Ask 'Is the Code binding on this actor?' Members and candidates yes, firms only by adoption.
  3. If law is mentioned, apply the stricter-of-law-or-Code rule.
  4. Eliminate options that say the Code is optional for members or candidates, or that a firm is automatically bound.
  5. Pick the option that applies the stricter rule or the correct duty, and move on.

Common mistakes in Evolution and Adoption of the Code and Standards

  • Saying the Code and Standards bind firms directly.

    Firms often write ethics policies, so students assume the Code covers them as members.

    Fix: Remember only members and candidates are bound. Firms are encouraged to adopt the Code and Standards, and asset managers have their own separate code.

  • Thinking candidates are not covered until they are charterholders.

    The word 'member' is used loosely and candidates feel like students rather than professionals.

    Fix: Candidates are bound because they are enrolled in the CFA Program and have agreed to follow the Code and Standards. Do not confuse this with Standard VII(A), which is a separate rule on conduct as a participant in CFA Institute programs, such as cheating on an exam.

  • Following local law whenever it exists.

    Students think law always overrides professional rules.

    Fix: Follow the stricter of law and Code. Law only wins when it is stricter.

  • Treating a new Handbook edition as a new set of rules to memorise from scratch.

    Update summaries sound like major changes.

    Fix: Treat the changes as refinements. Link each change to the Standard it touches, then apply it as you would the older rule.

  • Giving specific early dates or details of the Code's history from memory.

    Online sources give different versions of the history.

    Fix: Stick to the curriculum text. Exams test application of the current rules, so focus on the edition in your curriculum.

  • Confusing the Code of Ethics with the Standards.

    Both appear together in the Handbook.

    Fix: The Code is the set of broad principles. The Standards are the specific duties. Cite the Standard when you give a specific violation.

Worked examples

Example 1

A Level III candidate works in a country where local law allows a practice that the Code and Standards prohibit. Her firm says the practice is fine because it is legal. What should she do, and why?

Show the solution
  1. Identify the actor: a candidate in the CFA Program. She is bound by the Code and Standards.
  2. Compare law and Code. The law allows the practice, but the Code prohibits it, so the Code is stricter.
  3. Apply the rule: comply with the stricter of law and Code.
  4. Conclude she must not engage in the practice, even though it is legal and the firm approves.
  5. Add a recommended action: tell her supervisor or compliance function why she cannot take part.

Answer: She must follow the Code and Standards because they are stricter than the local law. Her firm's approval does not change her duty, so she should refuse the practice and explain why to her employer.

Example 2

A boutique asset manager tells its staff: 'We have adopted the CFA Institute Code and Standards firm-wide, so only our CFA charterholders need comply.' Evaluate the statement.

Show the solution
  1. Identify the actors: a firm adopting the Code and its staff, some of whom are charterholders.
  2. Recall the rule: the Code binds CFA Institute members and candidates personally. This includes charterholders and any staff who are candidates in the CFA Program.
  3. Note that firm adoption is voluntary. It is best practice when applied firm-wide, but a firm can adopt it only in part.
  4. Check who else is covered: staff who are neither members nor candidates are not bound by the Code itself. They are bound only through the firm's own policy.
  5. Check the distinction: a firm that manages assets may also use the Asset Manager Code, which is separate.
  6. Reach a conclusion on the statement.

Answer: The statement is imprecise. Saying 'only charterholders' is wrong, because candidates are bound personally too. A firm may adopt the Code voluntarily, and doing so firm-wide is best practice. Staff who are not members or candidates are bound only through the firm's policy.

Exam tips

  • Look at the actor first. Most wrong options in this topic get the actor wrong, such as treating a firm as a member or a candidate as exempt.
  • Whenever law appears in a stem, apply the stricter-rule test before reading the options.
  • For recent edition changes, learn them from the official text and be ready to link each to a Standard. Never invent details.
  • In essay sets, obey the command word. 'State' needs the rule only, while 'justify' needs the rule plus a reason from the case facts.
  • Keep answers short. Name the rule, tie it to the facts, and give the required action. Extra history earns no points.

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

Who must comply with the CFA Code and Standards?

CFA Institute members, including charterholders, and candidates in the CFA Program must comply. Firms are encouraged to adopt the Code and Standards but are not bound as members. Asset managers have a separate Asset Manager Code.

What are the main changes in the latest edition of the Standards of Practice Handbook?

Use the edition of the Handbook in your current curriculum. Its changes refine the Code and Standards through updated wording, guidance and examples. Learn the specific changes from your curriculum text and link each to the Standard it affects.

What happens if a member or candidate breaks the Code and Standards?

CFA Institute can investigate through its Professional Conduct Program. Sanctions range from public censure to suspension of membership or candidacy, and revocation of the charter. Members also confirm compliance annually.

What if local law conflicts with the Code and Standards?

Follow the stricter of the two. If the law is stricter, follow the law. If the Code is stricter, follow the Code. If no law applies, the Code governs.