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FRM Exam Part I · GARP Code of Conduct

GARP Code of Conduct Principles and Ethical Conduct

Updated 11 October 2026 · Fact-checked

The GARP Code of Conduct sets out principles of professional integrity and ethical conduct for FRM candidates and members: act with integrity, honesty and fairness, take responsibility for your work, and promote ethical practice. To answer exam questions, find the principle at stake and choose the most ethical, transparent action.

Understand Principles of Professional Integrity and Ethical Conduct

The GARP Code of Conduct is the ethical standard for FRM candidates and certificate holders. It exists because risk managers hold sensitive information and influence decisions. Trust in the profession depends on how they behave.

The code rests on a few core principles. Professional responsibility means you are accountable for your work and your conduct. Integrity means you act in line with ethical values even when it costs you. Honesty means you do not mislead, misstate or hide material facts. Fairness means you treat clients, employers, colleagues and others without improper bias or favouritism.

The code also asks you to promote ethical practice. You should support a culture where ethical behaviour is normal. If you see unethical conduct, you should not ignore it. You should also respect the profession by keeping up your competence and not damaging its reputation.

These principles are not rules to memorise as lists of numbers. They are judgment tools. Exam questions give a short scenario and ask what the person should do, or which principle was breached. Your job is to spot the principle and pick the response that best protects integrity, honesty and fairness.

In practice the principles overlap. A risk analyst who tweaks a VaR report to look better breaches honesty and integrity. One who gives a favoured client early information breaches fairness. Naming the main breach is enough; do not worry that others also apply.

Key formulas to remember

Core principles to recall
Professional responsibility + Integrity + Honesty + Fairness + Promoting ethical practice
Use this as a checklist when reading any scenario. The exact wording of GARP's published code can differ, so check the current Study Guide.
Decision test
Accurate and complete? Fair to all parties? Within my competence? Would I be comfortable if it were public?
This is a study aid, not an official GARP formula. It helps you screen answer options quickly.

How to solve Principles of Professional Integrity and Ethical Conduct questions

Ethics questions have no calculation. They reward careful reading and consistent principles.

  1. 1Read the scenario and identify who is involved: you, your employer, a client, a colleague or the public.
  2. 2Find the conduct in question: misstatement, favouritism, pressure, ignoring a breach, or acting beyond competence.
  3. 3Match it to a principle: honesty, integrity, fairness, responsibility or promoting ethical practice.
  4. 4Remove options that hide, delay or ignore the problem, or that put personal gain first.
  5. 5Remove options that are extreme or disproportionate when a simpler correct step exists.
  6. 6Choose the option that is transparent, accurate and fair, and that follows proper channels such as raising it with compliance or senior management.
  7. 7Check that your answer fits the question asked: a breach, a principle, or a best action.

Quickest way: Principle-first elimination

When to use it: Use this when time is short and the scenario is a straightforward conduct question.

  1. Underline the action taken in the scenario.
  2. Ask: is it truthful, fair and within my duty?
  3. Discard options that conceal, mislead or favour one party.
  4. Between the rest, pick the one that corrects the problem openly and through proper channels.

Common mistakes in Principles of Professional Integrity and Ethical Conduct

  • Choosing the answer that is good for the employer's profit.

    Real workplaces reward results, so commercial logic feels natural.

    Fix: Ethical duties override profit. If an option benefits the firm by misleading someone, it is wrong.

  • Picking an option to quietly ignore a minor breach.

    Candidates think small issues are not worth raising.

    Fix: Promoting ethical practice means not turning a blind eye. Prefer the option that addresses the issue properly.

  • Choosing a drastic step such as resigning or going public first.

    It feels like the most principled move.

    Fix: Usually the best answer is to follow internal channels first, such as escalating to compliance or senior management, unless the scenario says they are involved.

  • Confusing honesty with fairness.

    Both involve treating people properly.

    Fix: Honesty is about truthful, complete information. Fairness is about equal, unbiased treatment. Name the one that fits the facts best.

  • Relying on personal opinion instead of the code's principles.

    Ethics questions feel subjective.

    Fix: Tie each choice to a named principle. The correct answer is the one that best satisfies those principles.

Worked examples

Example 1

A risk analyst finds that her VaR model understates risk in a new product. Her manager asks her to leave the figure unchanged in the board report to avoid alarming directors. What should she do?
A) Leave it unchanged as instructed
B) Correct the figure and disclose the limitation, raising the issue through proper channels
C) Remove the product from the report
D) Tell only the product's sales team

Show the solution
  1. Identify the conduct: a known misstatement in a report to the board.
  2. Match the principle: honesty and integrity, with professional responsibility for her own work.
  3. Eliminate A: it knowingly misleads the board.
  4. Eliminate C: omitting the product also hides material information.
  5. Eliminate D: it excludes the people who rely on the report and fails to correct it.
  6. B is accurate, transparent and uses proper channels.

Answer: B

Example 2

A GARP member managing a client portfolio learns of a big trade by the firm. Before it is executed, he places the same trade in his own account. Which principle is most directly breached?
A) Fairness, because he puts his own interest ahead of clients and others
B) Competence, because he lacks training
C) Disclosure of fees
D) Record retention

Show the solution
  1. Identify the conduct: using advance knowledge of client activity for personal gain.
  2. The harm is that clients are disadvantaged and his own interest takes priority.
  3. This is an issue of fairness and integrity, and of conflicts of interest.
  4. Options B, C and D describe matters not raised by the facts.
  5. A names the breach that fits.

Answer: A

Exam tips

  • Read the last line first so you know whether the question asks for a breach, a principle or the best action.
  • Prefer answers that are transparent and use internal escalation before external action.
  • Be wary of absolute words like 'never' or 'always' in options unless the principle really is absolute.
  • Do not spend long on ethics questions. If two options remain, choose the one that protects the client or public and the accuracy of information.
  • Re-read the current GARP Study Guide each year, as the curriculum is revised annually.

Practice questions from GARP Code of Conduct

Principles of Professional Integrity and Ethical Conduct in other exams

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

Principles of Professional Integrity and Ethical Conduct: frequently asked questions

What are the main principles of the GARP Code of Conduct?

They centre on professional responsibility, integrity, honesty, fairness and promoting ethical practice in risk management. You should be able to match a scenario to one of these. Check GARP's current published code for exact wording.

How do I answer GARP Code of Conduct questions?

Identify the conduct, match it to the principle it breaches, and remove options that hide or mislead. Then choose the response that is honest, fair and goes through proper channels.

Are there calculations in the Code of Conduct topic?

No. Questions are scenario-based and test judgment. The skill is applying principles consistently, not computing numbers.

Do I need to memorise the code word for word?

No. You need to understand the principles well enough to apply them to a scenario. Focus on the ideas and on practising scenario questions.