Level III Core · Guidance for Standard I: Professionalism

CFA Standard I(A) Knowledge of the Law Explained

Updated 8 October 2026 · Fact-checked

Standard I(A) requires members and candidates to understand and comply with all applicable laws, rules and regulations, including the Code and Standards. When rules conflict, follow the stricter one. If you know of a violation by others, you must dissociate from it. Reporting to a supervisor, compliance or a regulator is encouraged, not mandatory.

Understand Standard I(A) Knowledge of the Law

Standard I(A) is the first rule in the Professionalism standard. It says you must know and follow the laws, rules and regulations that apply to your professional activities. This includes the Code and Standards themselves.

Which law applies depends on the facts. Relevant facts include where you work, where your clients are and where the business is conducted. The client's residence alone does not settle the question. When you are unsure which law applies, seek legal or compliance advice.

The next question is what happens when these sources disagree. The Standard gives a simple answer: follow the stricter of the applicable law and the Code and Standards. If applicable law allows something that the Code and Standards prohibit, you follow the Code and Standards. If applicable law is tougher than the Code and Standards, you follow the law. You must not break an applicable law to meet the Code, and you must not use a loose law as an excuse to lower your ethics.

The third duty is about other people. If you know of a violation of laws, rules or the Code and Standards by others, you must not participate in it. You must dissociate from it. This means you stop any involvement in the activity. Dissociation is the required action. You are also encouraged to report the violation to your supervisor or compliance, and to the regulator where appropriate. These reports are encouraged, not strictly mandatory under the Standard. Check whether any specific legal duty to report applies to you.

Knowing the law does not mean you need to be a lawyer. The Standard expects you to stay informed, ask compliance or legal counsel when unsure, and keep up with changes. Members who work across borders have extra work to do. They should understand the laws that may apply to their activities, and where the law is silent, the Code and Standards still apply. Remaining involved in a known violation can itself be a breach.

Key rules to remember

Stricter rule: Applicable law stricter than Code → follow the law. Code stricter than applicable law → follow the Code.; Applies to every conflict between applicable law, rules and the Code and Standards. Always pick the stricter.
Dissociation duty: Know of a violation → do not participate → dissociate (required) → reporting encouraged; Dissociation is the required action. Reporting to a supervisor, compliance or a regulator is encouraged or recommended, not mandatory under the Standard.
Applicable law in cross-border cases: Applicable law depends on the facts: where you work, where the clients are, where the business is conducted; Client residence alone does not decide it. If two applicable laws or the Code conflict, follow the stricter. Seek legal or compliance advice when unsure.
Record of dissociation: Written note of concerns, discussion with supervisor or compliance, and withdrawal from the activity; Document what you did and why. Dissociation steps may include ceasing work on the matter.

How to solve Standard I(A) Knowledge of the Law questions

Use this method for any Standard I(A) question, whether it is an item set or an essay.

1Identify every source of rules in the facts: local law, any other law that applies to the activity, firm policy and the Code and Standards.
2Decide which laws apply to the member's activities, using the facts: where the member works, where the clients are and where business is conducted.
3Compare the applicable sources. Decide which is stricter on the specific conduct in question.
4State the rule: follow the stricter requirement. Do not break any applicable law to meet the Code, and do not use a lax law to avoid the Code.
5Check whether the facts involve another person's violation. If you know of it, you must not participate.
6Choose the action: dissociate (stop involvement, remove your name, decline to continue). Then note that reporting to a supervisor, compliance or a regulator is encouraged.
7Match the action to the question's command word. For 'determine whether', say Violated or Not violated. For 'recommend', name the single best action.
8Give the reason in one short sentence that cites the stricter rule or the dissociation duty.

Quickest way: Stricter rule and dissociate check

When to use it: Use when you have about a minute for a multiple-choice question that mixes law, Code and another person's misconduct.

Underline the law and the Code requirement in the vignette.
Ask which is stricter. That one is the answer for the member's own conduct.
Ask if someone else is breaking a rule. If yes, the right answer must include dissociating. Reporting is a good addition but is not the core requirement.
Eliminate options that say 'follow local law only' or 'ignore the violation'. Also eliminate options that leave the member involved.
Pick the option that complies with the stricter rule and shows active dissociation.

Common mistakes in Standard I(A) Knowledge of the Law

Following local law because it is the law, even when the Code is stricter.
Candidates assume legal compliance is the whole duty.
Fix: Apply the stricter rule. If the Code is tougher, follow the Code. Law is the floor, not the ceiling.
Breaking applicable law to meet the Code.
Candidates over-apply the idea that the Code always wins.
Fix: The stricter rule applies, but you may not violate an applicable law. If the law is tougher, follow the law.
Assuming the client's country law always applies, or never applies.
Candidates pick a single fact, such as client residence, and stop there.
Fix: Look at all the facts: where the member works, where the clients are and where the business is conducted. Seek legal or compliance advice when unsure.
Thinking that dissociation means reporting to the regulator.
The words 'dissociate' and 'report' are blended together.
Fix: Dissociation means stopping your participation. It is the required action. Reporting to a supervisor, compliance or a regulator is encouraged where appropriate but is not mandatory under the Standard.
Staying involved while only voicing a concern.
Candidates think raising an objection is enough.
Fix: You must cease participating in the activity. Voicing concern without withdrawing can still be a violation.
Ignoring a violation because you did not commit it.
Candidates focus on their own actions only.
Fix: If you know of a violation, you must not participate in it and you must dissociate. Staying involved in a known violation can breach the Standard.
Assuming no law means no duty.
In countries with little regulation, candidates think nothing applies.
Fix: The Code and Standards apply even where local law is silent. Follow them as the standard of conduct.

Worked examples

Example 1

A portfolio manager in Country X serves a client in Country Y. Country X law permits accepting a gift from a broker without disclosure. Country Y law, which applies to the manager's activities for this client, requires disclosure of all gifts above a small value. The Code and Standards require disclosure of gifts that could impair objectivity. The manager receives a valuable gift. What should the manager do?

Show the solution

Identify the sources: Country X law (permits), Country Y law (requires disclosure and is stated to apply to the manager's activities), the Code and Standards (require disclosure where objectivity could be impaired).
Compare: Country Y law and the Code are stricter than Country X law on this point.
Apply the stricter rule: the manager must follow the stricter requirement, which means disclosing the gift.
Even if there were doubt about whether Country Y law applies, the Code is stricter than Country X law, so the manager must still disclose. The manager should seek legal or compliance advice on which law applies.

Answer: The manager must disclose the gift. The stricter requirement, Country Y law and the Code, applies over the permissive Country X law.

Example 2

An analyst learns that a senior colleague is backdating trade tickets to give a favoured client better prices. The analyst has not done any backdating. Which action best satisfies Standard I(A)? A. Do nothing, since the analyst is not involved. B. Continue working with the colleague but voice concern. C. Dissociate from the activity and report the matter to compliance. D. Report only to the securities regulator.

Show the solution

Recognise that the analyst knows of a violation by another person.
Apply the duty: do not participate and dissociate from the violation.
Dissociation means ceasing any involvement. Reporting to compliance is encouraged and is a sound addition.
Eliminate A (passive, no dissociation), B (still involved, so no dissociation) and D (it omits dissociation and ceasing involvement).

Answer: C. The analyst should dissociate from the activity and report the matter to compliance.

Exam tips

When a vignette lists two rules, find the stricter one before reading the options. It usually decides the answer.
In essay sets, if the command word is 'recommend' or 'determine', name the action or conclusion first, then give one line of reasoning.
Reject options that say 'follow local law only' unless the applicable law is stricter than the Code.
For dissociation questions, the required element is stopping involvement. Prefer answers that do this, and treat reporting to a supervisor, compliance or regulator as encouraged, not required.
Remember that the Code and Standards apply even where no securities law exists.

Standard I(A) Knowledge of the Law in other exams

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

Standard I(A) Knowledge of the Law: frequently asked questions

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

It requires you to understand and comply with all applicable laws, rules and regulations, including the Code and Standards. When they conflict, you follow the stricter. You must also not participate in violations by others, and you must dissociate from them.

What should I do if the law conflicts with the CFA Code and Standards?

Follow the stricter requirement. If the applicable law is tougher, follow the law. If the Code is tougher, follow the Code. Never break an applicable law to satisfy the Code. If you are unsure which law applies, seek legal or compliance advice.

How do I dissociate from a violation under Standard I(A)?

Stop your involvement in the activity. This is the required action. You are also encouraged to tell a supervisor or compliance and to document what you did. In some cases, you may need to withdraw from the work entirely.

Must I report every violation to the regulator?

Not under the Standard itself. It requires dissociation and encourages reporting to a supervisor, compliance or, where appropriate, a regulator. Check any specific legal duty to report that applies to you.