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Level III Core · Guidance for Standard VI: Conflicts of Interest

Standard VI Conflicts of Interest: Guidance and Cases

Updated 8 October 2026 · Fact-checked

Standard VI covers conflicts of interest: VI(A) requires you to make full and fair disclosure of matters that could impair independence or objectivity, VI(B) gives client and employer transactions priority over the member's own, and VI(C) requires disclosure of referral fees. Solve cases by finding the conflict, the affected party and the required disclosure or action.

Understand Revised Conflicts Standard and Application Cases

A conflict of interest exists when your own interests, or your employer's, could weaken your independence or objectivity, or could harm what you owe a client. Standard VI exists because clients cannot see these conflicts unless you tell them. Disclosure is the core remedy.

The Standard has three parts. VI(A) Disclosure of Conflicts: members must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with duties to clients, prospective clients and their employer. The Handbook's guidance is that disclosures should be prominent and in plain language that communicates the relevant information effectively. VI(B) Priority of Transactions: investment transactions for clients and employers must have priority over investment transactions in which a member is the beneficial owner. VI(B) does not itself address how clients rank against the employer. Standard III(A) and the member's duties to clients govern that question. VI(C) Referral Fees: members must disclose to their employer, clients and prospective clients any compensation or benefit received from, or paid to, others for recommending products or services.

Study the current edition of the CFA Institute Code and Standards and Standards of Practice Handbook in the curriculum. Do not rely on memory of older editions, and do not assume a rule changed unless the current text shows it. The exam does not hand you the Handbook, so learn the wording of each Standard and apply it exactly.

In case questions, the test is rarely whether a conflict exists. It is what you must do about it. The answer is usually one of three: disclose, disclose and obtain consent or manage it, or avoid the situation. Always tie the answer to who is harmed or misled if nothing is said.

Recommended procedures support compliance. Firms should adopt a compliance system with written policies on conflicts, personal trading, and referral arrangements, and monitor them. Members should avoid conflicts where possible and disclose those that remain.

Key rules to remember

Standard VI(A) Disclosure of Conflicts
Full and fair disclosure of matters that could impair independence and objectivity or interfere with duties to clients, prospective clients and employer
Handbook guidance: disclosures should be prominent and in plain language that communicates the relevant information effectively. Boilerplate buried in documents is weak.
Standard VI(B) Priority of Transactions
Client and employer transactions > personal (beneficial-owner) transactions
Investment transactions for clients and employers must have priority over those in which the member is the beneficial owner. VI(B) does not itself rank clients against the employer. Do not trade ahead of clients or in a way that disadvantages them.
Standard VI(C) Referral Fees
Disclose any compensation or benefit paid or received for recommending products or services
Disclose to employer, clients and prospective clients before the client enters into a formal agreement for services, so they can evaluate the full cost of the services and any partiality in the recommendation.
Recommended procedures for compliance
Written conflicts policy + disclosure + personal-trading controls + monitoring + referral-fee disclosure
Firms should adopt and enforce these. Members should support them and report breaches.

How to solve Revised Conflicts Standard and Application Cases questions

Use this sequence on any Standard VI case or multiple-choice item.

  1. 1Read the question stem first and note the command word, such as identify, determine, justify or recommend.
  2. 2Find the interest at stake: the member's personal holding, the employer's business tie, a referral payment, or a gift or benefit.
  3. 3Name the affected party: client, prospective client or employer. Ask who could be misled or disadvantaged.
  4. 4Match the facts to the sub-standard: VI(A) for independence and objectivity, VI(B) for personal trades, VI(C) for referral compensation.
  5. 5Decide the required action: avoid, disclose, or disclose plus manage. Check whether the member did it in time and in clear terms.
  6. 6State the verdict clearly (violated or not violated) and give the reason in one or two short sentences.
  7. 7Where asked for a corrective action or procedure, give a specific one, such as a written disclosure, a restricted list, a pre-clearance rule or a blackout period.

Quickest way: Three-Question Conflict Screen

When to use it: Use it on item-set questions where time is short and four options look similar.

  1. Ask: does anyone benefit apart from the client? If yes, a conflict exists.
  2. Ask: was it disclosed fully, clearly and before the client relied on the advice? If not, VI(A) or VI(C) is likely breached.
  3. Ask: did the member's own trade come before or at the expense of clients? If yes, VI(B) is breached.
  4. Pick the option that discloses or removes the conflict, not the one that merely hides it or relies on the client finding out.

Common mistakes in Revised Conflicts Standard and Application Cases

  • Treating any conflict as a violation in itself.

    Students assume conflicts are banned.

    Fix: A conflict is not a violation if it is properly disclosed or avoided. The breach is the failure to disclose or manage it.

  • Thinking disclosure to the employer is enough when clients are affected.

    Students stop at the first named party.

    Fix: Check who needs to be told. Referral fees and objectivity issues usually require disclosure to clients and prospective clients as well.

  • Confusing VI(B) with Standard II(A) on material nonpublic information.

    Both involve trading by the member.

    Fix: VI(B) is about trade priority and fairness to clients. II(A) is about acting on material nonpublic information. A case can breach both.

  • Accepting vague, generic disclosure as full and fair.

    Students see the word disclosure and stop reading.

    Fix: Look at whether the disclosure is prominent and in plain language that communicates the relevant information effectively. Fine print that hides the conflict is not enough.

  • Disclosing a referral fee after the client has already agreed to the services.

    Students focus on whether it was disclosed, not when.

    Fix: Disclosure must come before the client enters into a formal agreement for services, so the client can evaluate the full cost and any partiality in the recommendation.

  • Relying on memory of an older Handbook edition.

    Older notes and forums circulate widely.

    Fix: Study the current Handbook edition in the curriculum, and apply the exact wording of the Standards.

Worked examples

Example 1

An analyst at a fund manager holds a large personal position in a small-cap stock. She now writes a buy recommendation on it for clients and says nothing about her holding. Has she violated Standard VI? Justify in two sentences.

Show the solution
  1. Identify the interest: her personal holding in the stock she recommends.
  2. Identify the affected party: clients relying on her recommendation, and her employer.
  3. Match the sub-standard: her holding could reasonably be expected to impair independence and objectivity, so VI(A) applies.
  4. Check action: she did not disclose it.
  5. Conclude: the omission is the breach, not the holding itself.

Answer: Yes, she violated Standard VI(A). Her ownership could reasonably impair her objectivity, and she did not make full and fair disclosure to clients and her employer. Disclosing the holding, or avoiding the recommendation, would have complied.

Example 2

A portfolio manager plans to buy a security personally. Her firm is also about to buy the same security in large size for client accounts. She places her personal order first because it is small and will not move the price. Which Standard is breached, and what should she do?

Show the solution
  1. Identify the facts: personal trade placed before the client orders in the same security.
  2. Identify the rule: under VI(B), investment transactions for clients and employers must have priority over investment transactions in which the member is the beneficial owner.
  3. Note that small size and no price impact do not remove the breach, because the order of priority was reversed.
  4. Identify the fix: wait until client trades are done, and use pre-clearance and blackout procedures.

Answer: She breached Standard VI(B) by trading ahead of clients. She should have waited until client orders were completed, and the firm should enforce pre-clearance and blackout rules for personal trades.

Exam tips

  • Read the command word first. Verdict and justification questions need a clear yes or no plus one reason.
  • In constructed response, name the Standard and sub-part, such as VI(A) or VI(C), then give the fact that triggers it.
  • When asked for recommended procedures, give specific, usable controls rather than general words like be honest.
  • Check timing in referral-fee cases: disclosure must come before the client enters into a formal agreement for services.
  • Know the wording of the current Handbook edition, and answer only the number of responses asked for, in the order given.

Revised Conflicts Standard and Application Cases in other exams

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

Revised Conflicts Standard and Application Cases: frequently asked questions

What does Standard VI cover?

It covers three duties. VI(A) requires disclosure of conflicts, VI(B) gives client and employer transactions priority over your own, and VI(C) requires disclosure of referral fees.

Is having a conflict of interest itself a violation?

No. A conflict that is avoided or properly disclosed is not a breach. The violation is failing to disclose or manage it as required.

Who must receive a referral-fee disclosure?

Your employer, clients and prospective clients. It must be made before the client enters into a formal agreement for services, so they can evaluate the full cost and any partiality in the recommendation.

How should I prepare for Standard VI case questions?

Practice finding the interest, the affected party and the required action. Study the current Handbook edition in the curriculum and rehearse short, precise justifications.