Ethical and Professional Standards

The first subject of CFA Level-1 Exam is Ethical & Professional Standards and it gets a 15% weightage. This has become a key topic, after the last decade's episode of sordid performance (ethically) in the Finance industry.

This is a very progressive step taken by the CFA Institute to ensure that the future Finance professionals will imbibe impeccable ethics & high professional standards, so that they can deliver superlative & blemish-less corporate governance. This subject covers all the standard practices related to ethics, challenges to ethical behavior and the role played by the ethics in the investment management profession.

This subject covers 7 standards of professional conduct:

Standard I -
Professionalism
  • Knowledge of the Law
  • Independence and Objectivity
  • Misrepresentation
  • Misconduct
Standard II -
Integrity of Capital Markets
  • Material Non-Public Information
  • Market Manipulation
Standard III - Duties to Clients and Prospective 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 Action
  • Diligence and Reasonable Basis
  • Communication with Clients and Prospective 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 CFA Candidate