CFA Program Level I — Ethical & Professional Standards flashcards

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The Code and Standards I–VII in applied scenarios — competence, material nonpublic information, mosaic theory, fair dealing, suitability, loyalty and whistleblowing, conflicts, designation use — plus the stricter-rule principle, the decision framework and GIPS basics.

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Learn deck · part of CFA Program Level I · written against: CFA Program Level I curriculum topics; Standards of Practice Handbook, 12th edition (2024), including Standard I(E) Competence. Updated 2026-10-10.

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Who is bound by the Code of Ethics and Standards of Professional Conduct?

CFA Institute members (including charterholders) and candidates enrolled in the CFA Program; breaches can lead to disciplinary sanctions by CFA Institute.
Code and Framework
Local securities law and the Code and Standards set different requirements on the same issue. Which must a member follow?

Whichever is stricter. If the law demands more, obey the law; if the Code and Standards demand more, meet the Code and Standards.

Watch out: a law that permits an act the Standards prohibit never excuses the violation.
Code and Framework
What does Standard I(A) Knowledge of the Law require?

Understanding and obeying every law, rule and regulation that governs one's work, the Code and Standards included; following the stricter one when they conflict; and never knowingly joining or helping a violation, dissociating from any found.

Watch out: the Standards do not require reporting a violation to regulators, though the law sometimes does.
Professionalism
What does Standard II(A) Material Nonpublic Information prohibit?

A member who holds material nonpublic information that could affect a security's value must not act on it, or cause others to act on it, for example by trading or passing it on.

Watch out: information disclosed selectively to a few analysts stays nonpublic until it reaches the market at large.
Capital Markets
What does Standard III(A) Loyalty, Prudence, and Care require?

A duty of loyalty to clients, acting with reasonable care and prudent judgment, and placing clients' interests before the employer's and one's own.
Duties to Clients
What does Standard IV(A) Loyalty (to employer) require?

Acting for the employer's benefit: not depriving it of one's skills, not disclosing its confidential information, and not otherwise causing it harm.
Duties to Employers
What does Standard V(A) Diligence and Reasonable Basis require?

Working carefully, thoroughly and independently, and backing every analysis, recommendation and action with enough research and investigation to give it a reasonable basis.

Watch out: a recommendation that loses money does not by itself breach V(A); the test is whether its basis was reasonable when made.
Investment Analysis
What does Standard VI(A) Avoid or Disclose Conflicts require?

Avoiding conflicts, or giving full and fair disclosure (prominent and in plain language) of those not avoided. A conflict is anything that could reasonably impair independence or objectivity or interfere with duties to clients, prospects or the employer.

Watch out: before 1 January 2024 the Standard was titled Disclosure of Conflicts and required disclosure only.
Conflicts of Interest
What does Standard VII(A) Conduct as Participants in CFA Institute Programs prohibit?

Anything that harms the reputation or integrity of CFA Institute or the CFA designation, or that undermines the integrity, validity or security of its programs and exams, such as cheating or sharing exam content.
Member Responsibilities
What is the purpose of the Global Investment Performance Standards (GIPS)?

Voluntary, globally recognized standards for calculating and presenting investment performance based on fair representation and full disclosure, so results are comparable across firms.
GIPS

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About these cards

Review status: Second-reader reviewed, with corrections applied.

Checked against:

Checked against the CFA Institute Code of Ethics and Standards of Professional Conduct and the Standards of Practice Handbook, 12th ed. (2024) (reference only; every Standard paraphrased, no text copied).
Checked against the GIPS standards for firms, 2020 edition (reference only).

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