How To Study Ethics Effectively For the CFA Exam

CFA Ethical Compass

Ethics is a tough topic on any level in the CFA curriculum. The Standards of Professional Conduct are not to be confused with common sense as there are many special cases relating to finance that require much deeper knowledge. To add a little spice to the mix, CFA Institute also puts forward the Code of Ethics that complements the Standards of Professional Conduct. When you study Ethics for the CFA Exam you must know your way around the  seven CFA Standards of Conduct and the Code of Ethics. To distinguish the two, remember the following:

The Standards of Conduct tell you what to do, and the Code of Ethics tells you how to do it.


The seven Standards of Professional Conduct are the following:

  1. Professionalism
    A) Knowledge of the Law
    B) Independence and Objectivity
    C) Misrepresentation
    D) Misconduct
  2. Integrity of Capital Markets
    A) Material Nonpublic Information
    B) Market Manipulation.
  3. Duties To Clients
    A) Loyalty, Prudence, and Care
    B) Fair Dealing
    C) Suitability
    D) Performance Presentation
    E) Preservation of Confidentiality
  4. Duties to Employers
    A) Loyalty
    B) Additional Compensation Arrangements
    C) Responsibilities of Supervisors
  5. Investment Analysis, Recommendations, and Actions
    A) Diligence and Reasonable Basis
    B) Communication with Clients and Prospective Clients
    C) Record Retention
  6. Conflicts of Interest
    A) Disclosure of Conflicts
    B) Priority of Transactions
    C) Referral Fees
  7. Responsibilities as a CFA Institute member or CFA Candidate
    A) Conduct as Members and Candidates in the CFA Program
    B) Reference to CFA Institute, the CFA designation, and the CFA Program

The Code of Ethics are the following:

  • Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
  • Client interest first. Place the integrity of the investment profession and the interests of clients above their own personal interests.
  • Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
  • Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
  • Promote integrity of capital markets, and uphold the rules governing capital markets.
  • Maintain and improve professional competence and strive to maintain and improve the competence of other investment professionals.

Now how to study best for this topic? Start by memorizing both the seven Standards of Professional Conduct and the Code of Ethics.

There is really no shortcut in Ethics.


You have to bite the bullet and read very carefully book 1 of the CFA curriculum. If you fully understand book 1, this is sufficient to cover all you need to know about ethics. You should work through all the examples, but this only makes sense after you know the Standards by heart. Print the list above and hang it above your desk (that’s what I did). Put a small copy in your wallet, so you can revise it on the go.

Once you know the Standards, Ethics is a very logical topic. You basically just have to overlay the seven Standards over any problem and then figure out which Standard is violated or not. It becomes very clear once you work through the examples. I would start with Ethics first so you have enough time to let the topic sink in until the exam.

If you’re interested, you can download my personal notes for ethics that I made when I studied for level 1, just to double check your own notes. Feel free to download them here.

I wish you all the best for the CFA exam!