Overview
The Ethics section is the largest single topic area on the CFA Level I exam, accounting for 15–20% of your total score. Unlike most topic areas, the Ethics score is graded on a relative basis — a strong ethics score can move a borderline candidate above the minimum passing score, and a weak score can pull a passing candidate below it. Ethics deserves disproportionate study time.
The CFA Institute Code of Ethics
The Code of Ethics establishes the fundamental obligations of all CFA Institute members and candidates. It requires practitioners to:
- Act with integrity, competence, diligence, and respect in all professional relationships
- Place client interests above personal and employer interests
- Use reasonable care and exercise independent professional judgment
- Practice and encourage others to practice in an ethical manner
- Promote the integrity and viability of the global capital markets
The Standards of Professional Conduct
The Standards are organized into seven categories:
- Standard I — Professionalism: Knowledge of the law; independence and objectivity; misrepresentation; misconduct
- Standard II — Integrity of Capital Markets: Material nonpublic information; market manipulation
- Standard III — Duties to Clients: Loyalty, prudence, and care; fair dealing; suitability; performance presentation; preservation of confidentiality
- Standard IV — Duties to Employers: Loyalty; additional compensation arrangements; responsibilities of supervisors
- Standard V — Investment Analysis, Recommendations, and Actions: Diligence and reasonable basis; communication with clients; record retention
- Standard VI — Conflicts of Interest: Disclosure of conflicts; priority of transactions; referral fees
- Standard VII — Responsibilities as a CFA Institute Member or Candidate: Conduct as members; reference to the CFA designation
Key Exam Themes
Exam questions test application, not memorization. Common scenarios include:
- An analyst receiving gifts or entertainment from clients (Standard I–B, Independence)
- A portfolio manager trading personally before executing client orders (Standard VI–B, Priority of Transactions)
- A research report with inadequate factual basis (Standard V–A, Diligence and Reasonable Basis)
- A candidate misrepresenting the CFA designation or progress toward it (Standard VII–B)
When answering ethics questions, identify which Standard applies, then ask what a reasonable, prudent professional would do to protect client interests and maintain market integrity.