Code of Ethics and Standards of Professional Conduct

Ethics carries real weight on the Level II exam, and every ethics item set assumes you know the framework cold: the six principles of the Code, the seven Standards and their sub-sections, and how CFA Institute enforces them. This module covers the Professional Conduct Program, the structure of the Code and Standards including the changes that took effect on 1 January 2024, and a working summary of what each Standard requires, so that later modules can focus on applying them to realistic cases.

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What you will learn

1. Describe how CFA Institute's Professional Conduct Program investigates complaints and imposes sanctions.

Professional Conduct staff investigate; the Disciplinary Review Committee, a body of volunteer members, enforces and supplies hearing panels.
Inquiries start from Professional Conduct Statements, written complaints, public reports, proctor reports and exam-integrity monitoring.
Staff can close a matter, send a cautionary letter, or propose a sanction; a rejected sanction goes to a hearing panel.
Sanctions include public censure, suspension and revocation for members, and suspension or a bar from the CFA Program for candidates.
Giving the PCP confidential client information during an investigation does not breach Standard III(E).

2. Summarise the components of the Code of Ethics and the seven Standards of Professional Conduct.

The Code states six broad principles; the Standards set 23 specific, enforceable requirements under seven headings.
Members and candidates are bound by both and members confirm this annually in the Professional Conduct Statement.
Clients' interests and the integrity of the profession and markets come before personal interest.
Since 1 January 2024: new Standard I(E) Competence; Standard V(B) now covers the nature and cost of services; Standard VI(A) is Avoid or Disclose Conflicts.
Questions often ask you to match a behaviour to the correct Standard, so know every sub-section by name.

3. Explain the duties each Standard places on members and candidates, including its sub-sections.

Where law and the Standards differ, the stricter requirement applies.
Several Standards turn on 'reasonable' effort or judgment rather than guaranteed outcomes: supervision, performance presentation, diligence.
Disclosure resolves many conflicts but never cures a breach of loyalty, fair dealing or the ban on using material nonpublic information.
Client interests come first, then the employer's, then the member's own.
Members are responsible for their own conduct and, as supervisors, for reasonable efforts to oversee others.

Module at a glance

Professional Conduct staff investigate; staff can close a case, caution, or propose a sanction, and a rejected sanction goes to a DRC hearing panel.
Sanctions range from public censure to suspension and revocation for members, and suspension or a bar for candidates.
Sharing client information with the PCP for an investigation does not breach confidentiality.
The Code states six principles; the Standards set 23 specific requirements under seven headings.
Since 2024: Standard I(E) Competence, cost and nature of services in V(B), and VI(A) Avoid or Disclose Conflicts.
When law and the Standards differ, follow the stricter; the Standards do not require reporting violations to regulators.
Map each action in a vignette to the most specific Standard, and watch for the action that is actually permitted.

This free module has 3 lessons, 14 practice questions with full explanations.

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