CFA (Chartered Financial Analyst) Ethical and Professional Standards Syllabus

Ethical and Professional Standards syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Ethical and Professional Standards in CFA (Chartered Financial Analyst), not a summary of it.

1. 1

   Code of Ethics and Standards of Professional Conduct

   6 topics

   • Components of the Code and Standards
     • Six components of the Code of Ethics
     • Seven Standards of Professional Conduct
     • Evolution and purpose of the ethical framework
   • Standard I: Professionalism
     • Knowledge of the Law
     • Independence and Objectivity
     • Misrepresentation
     • Misconduct
   • Standard II: Integrity of Capital Markets
     • Material Nonpublic Information and insider trading
     • Market Manipulation
   • Standard III: Duties to Clients
     • Loyalty, Prudence, and Care
     • Fair Dealing
     • Suitability
     • Performance Presentation and Preservation of Confidentiality
   • Standards IV-VI: Employers, Investment Actions, Conflicts
     • Duties to Employers (loyalty, additional compensation, supervisors)
     • Investment Analysis, Recommendations, and Actions
     • Conflicts of Interest and disclosure
   • Standard VII: Responsibilities as a CFA Member or Candidate
     • Conduct in the CFA Program
     • Reference to CFA Institute, designation, and Program
2. 2

   Application of the Code and Standards

   4 topics

   • Ethical decision-making frameworks
   • Case-based application to research and recommendations
   • Application to firm policies and compliance procedures
   • Level III professional and ethical practice in portfolio management
3. 3

   Global Investment Performance Standards (GIPS)

   4 topics

   • Fundamentals of GIPS compliance
     • Purpose, scope, and key features
     • Definition of the firm and compliance requirements
   • Composite construction and discretion
   • Calculation and presentation requirements
   • Verification and GIPS for asset owners

Ethical and Professional Standards flashcards for CFA (Chartered Financial Analyst)

22 of 51 cards from the Ethical and Professional Standards deck — real questions with worked answers.

1. What two main documents form the foundation of the CFA Institute Code and Standards?

   The Code of Ethics and the Standards of Professional Conduct.

2. How many components make up the CFA Institute Code of Ethics?

   Six components (six tenets).

3. How many Standards of Professional Conduct are there, and how are they grouped?

   Seven Standards (Standard I through VII), each subdivided into specific sub-standards.

4. List the six components of the CFA Code of Ethics (summarized).

   Members must: (1) act with integrity, competence, diligence, respect and in an ethical manner; (2) place the integrity of the profession and clients' interests above their own; (3) use reasonable care and independent professional judgment; (4) practice and encourage others to act professionally and ethically; (5) promote the integrity and viability of capital markets; (6) maintain and improve their professional competence.

5. Name the seven Standards of Professional Conduct.

   I Professionalism; II Integrity of Capital Markets; III Duties to Clients; IV Duties to Employers; V Investment Analysis, Recommendations and Actions; VI Conflicts of Interest; VII Responsibilities as a CFA Institute Member or Candidate.

6. What is the fundamental purpose of the CFA ethical framework?

   To protect and promote the integrity of capital markets and the investment profession, ensuring members place client interests and market integrity above their own, thereby maintaining public trust.

7. Why did the CFA Institute develop a formal Code and Standards (its evolution)?

   Because investment professionals act as fiduciaries handling others' assets; a uniform global ethical framework was needed to standardize conduct, build investor trust, and adapt to evolving markets and regulations.

8. What are the four sub-standards of Standard I: Professionalism?

   I(A) Knowledge of the Law; I(B) Independence and Objectivity; I(C) Misrepresentation; I(D) Misconduct.

9. Under Standard I(A) Knowledge of the Law, what must a member do when the Code and Standards conflict with applicable law?

   Comply with the more strict (higher) of the applicable law or the Code and Standards. Where law is silent, follow the Code and Standards.

10. Under Standard I(A), what should a member do upon discovering an ongoing violation of law by an associate?

    Dissociate from the illegal or unethical activity; members are encouraged to attempt to stop it (e.g., report to a supervisor or compliance) but are not required to report to authorities unless law mandates it.

11. What does Standard I(B) Independence and Objectivity require?

    Members must use reasonable care and judgment to maintain independence and objectivity, and must not offer, solicit, or accept any gift, benefit, compensation, or consideration that could compromise their own or another's independence and objectivity.

12. Under Standard I(B), how should modest gifts versus client/issuer-paid travel be handled?

    Token gifts of nominal value from clients (for work already done) may be acceptable with disclosure; gifts or paid travel from issuers/companies under analysis should be declined or paid for by the firm to preserve objectivity.

13. What is prohibited under Standard I(C) Misrepresentation?

    Making any untrue statement or omission of fact in investment analysis, recommendations, actions, or other professional activities, including guaranteeing returns and plagiarism.

14. How does plagiarism relate to Standard I(C) Misrepresentation?

    Using another's work (reports, data, models, language) without attribution is a form of misrepresentation; members must cite sources, except for recognized statistical/factual data from named sources is encouraged.

15. What conduct does Standard I(D) Misconduct address?

    Members must not engage in any professional conduct involving dishonesty, fraud, or deceit, or commit any act that reflects adversely on their professional reputation, integrity, or competence.

16. What is the difference between Standard I(C) Misrepresentation and Standard I(D) Misconduct?

    Misrepresentation (I-C) deals with false/misleading statements in professional work; Misconduct (I-D) deals broadly with dishonest, fraudulent, or deceitful acts and personal behavior reflecting on professional integrity.

17. What are the two sub-standards of Standard II: Integrity of Capital Markets?

    II(A) Material Nonpublic Information; II(B) Market Manipulation.

18. Define 'material' information under Standard II(A).

    Information is material if its disclosure would likely affect the price of a security or if reasonable investors would want to know it before making an investment decision.

19. Define 'nonpublic' information under Standard II(A).

    Information is nonpublic until it has been disseminated or made available to the marketplace in general (to all investors), not selectively to a few.

20. What does Standard II(A) prohibit regarding material nonpublic information (MNPI)?

    Members who possess MNPI that could affect a security's value must not act or cause others to act on it (no trading and no tipping).

21. What is the 'mosaic theory' under Standard II(A)?

    An analyst may combine public information with nonmaterial nonpublic information to reach an investment conclusion and act on it, even if that conclusion would be material if disclosed by the company.

22. What control is recommended to prevent misuse of MNPI within a firm?

    Establishing 'information barriers' (firewalls) between departments and maintaining restricted/watch lists to control the flow of MNPI.

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