| Ethics | ||
|---|---|---|
| Topic Weight | Number of Questions | |
| Level 1 | 15-20% | ca. 28 |
| Level 2 | 10-15% | 8-12 |
Even though there are no formulae to memorize in the Ethics readings, it’s consistently regarded as one of the more difficult CFA topics due to the questions' subjectivity and the material's complexity. Aside from its importance throughout each level of the CFA, Ethics is unique for the ethics adjustment implemented by CFA Institute (CFAI). If you are on the edge of failing, a strong Ethics score may warrant a pass.
What to Expect in CFA Level 1 Ethics
CFA Level 1 Ethics is the most heavily weighted topic on the exam at 15-20%. The topic introduces CFAI’s 6 Codes of Ethics and 7 Standards of Professional Conduct (the Code and Standards). You must use these Codes and Standards as a framework for ethical decision-making throughout your financial career. While there are no formulae to memorize, Ethics is commonly regarded as one of the most challenging CFA Level 1 topics due to its breadth of material and relatively subjective nature. The topic material closes with a short introduction to Global Investment Standards (GIPS). Some of this material is optional.
Exam Weighting
The CFA Ethics topic has an exam weighting of 15-20%, meaning that approximately 27-36 of the 180 CFA Level 1 exam questions focus on this topic.
| No. of Learning Modules | No. of Formulas |
|---|---|
| 5 | 0 |
Level 1 Ethics 2025 Syllabus, Readings, and Changes
CFA Level 1 exam has not seen much fluctuation with the ethics portion since last year. The minimal changes include merging 2 or more readings (now called learning modules) leading to lesser learning outcome statements (LOS) this year.
| No. of Learning Modules – 5 | No. of LOS – 21 | |
|---|---|---|
|
Summary
Introduces the CFAI® Code of Ethics and Standards of Professional Conduct and how to apply such standards to particular situations. Concludes with an overview of the Global Investment Performance Standards (GIPS).
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Ethics and Trust in the Investment Profession
Financial analysis is about more than formulae and forecasting. Financial markets and businesses could not function without trust in individuals and institutions. This reading introduces the concept of investing as a profession and the importance of ethical behavior in investing. You will learn to create trust through maintaining standards, abiding by codes, and applying an ethical framework to your daily professional decisions.
Code of Ethics and Standards of Professional Conduct
Students often struggle with Ethics because it relies more on subjectivity and intuition than formulae. However, the Standards of Practice Handbook makes the theoretical side of Ethics more concrete by providing guidance on common ethical dilemmas that investment professionals face on a daily basis.
This reading describes the importance of building a positive community of reputable investment professionals who strive to meet and surpass industry expectations. You will learn that Ethics is not just about an individual’s good choices but the aggregate of ethical decisions made by a community of members.
“Through members’ and candidates’ adherence to these principles as a whole, the integrity of and trust in the capital markets are improved.”
Guidance for Standards I-VII
You are expected to understand how to apply the Code of Ethics and Standards of Professional Conduct to real-world situations that they may face as professional financial analysts.
Guidance for Standards is broken down into 7 general sections, each with its own subcategories:
- Professionalism
- Integrity of Capital Markets
- Duties to Clients
- Duties to Employers
- Investment Analysis, Recommendations, and Actions
- Conflict of Interest
- Responsibilities as a CFA Institute Member or CFA Candidate
The readings will instruct you on procedures designed to prevent violations and conduct yourself appropriately in situations involving your professional integrity.
Introduction to the Global Investment Performance Standards (GIPS)
The Global Investment Performance Standards are voluntary ethical guidelines applied to investment performance reporting and designed by CFA Institute (CFAI) in partnership with GIPS Standards sponsors and industry experts. Investment firms and asset owners abide by GIPS as a commitment to transparency for investors.
This reading introduces GIPS standards and explains the reasoning behind their creation. You will become familiar with the benefits of industry-wide standards and their elevation of the community as a whole.
Ethics Application
This course prioritizes Company Analysis: Past and Present, equipping you to articulate elements in a research report, determine a company’s business model, and evaluate revenue factors such as pricing power. It also guides the assessment of operating profitability, working capital efficiency, and insights into financial decision-making regarding capital investments and structure.
Ethics Application
This reading allows you to exercise your newly acquired ethics thinking. You will apply your CFAI Code of Ethics and Standards of Professional Conduct knowledge to a series of real-world scenarios. After selecting an answer, the reading presents the correct response and the rationale behind it.
CFA Ethics Level 1 Sample Questions and Answers
These sample questions are typical of the probing multiple-choice questions on the L1 exam. During the exam, you have about 90 seconds to read and answer each question, carefully designed to test knowledge from the CFA curriculum. UWorld’s question bank is built to expose you to exam-like questions and illustrate and explain the concepts tested thoroughly.
If a professional organization has standards of conduct in addition to its code of ethics, the purpose of the standards is most likely to describe:
- shared principles.
- laws and regulations.
- acceptable behaviors.
Zhao Fen, CFA, is an independent investor. She holds a large position of Formula Industries, a lightly traded stock with low liquidity, in one of her two personal accounts. If Zhao wishes to exit the position, which of the following would most likely violate the Standards?
- Using an intermediary to sell the position outside of the market to avoid price impacts.
- Selling her holdings as one position, which would likely cause a large drop in the price.
- Trading the stock between personal accounts to attract interest from other market participants.
Letitia Armando, CFA, works for a global investment bank. She is transferred to an office in an emerging market country. The local office staff suggest that Armando pay an unofficial “administrative fee” to local regulatory officials in return for ensuring that the bank receives approval on new public offerings. Armando researches local law and finds that it does not prohibit such payments and that, in fact, it is the accepted local practice. If Armando pays the officials, will she most likely violate Standard I: Professionalism?
- No, since the payments are not illegal
- No, since the standard requires compliance with local law
- Yes, since the payments compromise the officials’ objectivity
What to Expect in CFA Level 2 Ethics
CFA Level 2 Ethics is one of the most heavily weighted topics on the exam at 10-15%. The topic material reiterates about 80% of the material found in the CFA Level 1 Ethics. Level 2 introduces the item set format for the entire exam, including Ethics. This form of testing ensures that you have a deeper understanding of the material.
Exam Weighting
The CFA Level 2 Ethics topic has an exam weighting of 10-15%, such that approximately 8-12 of the 88 CFA Level 2 exam questions or 2-3 item sets focus on this topic.
| No. of Learning Modules | No. of Formulas |
|---|---|
| 3 | 0 |
Level 2 Ethics 2025 Syllabus, Readings, and Changes
| No. of Learning Modules – 3 | No. of LOS – 6 | |
|---|---|---|
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Summary
Dives deeper into CFAI Code of Ethics and Standards of Professional Conduct and how you can use these codes and standards to resolve ethical conflicts in the investment profession. You will confront numerous case applications. |
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Code of Ethics and Standards of Professional Conduct
This reading dives deeper into the nuances of the Standards of Practice Handbook presented in the analog CFA Level 1 Ethics chapter. You will study the 6 components of the Code of Ethics and the 7 Standards of Professional Conduct.
Guidance for Standards I-VII
You must demonstrate their knowledge of the CFAI Code of Ethics and Standards of Professional Conduct through its application. The 7 standards were presented in a similar reading for Level 1. The reading recommends various procedures that you will use to prevent code and standard violations and best practices from upholding them.
Application of the Code and Standards: Level 2
Like the related reading in CFA Level 1 Ethics, this reading will show how to apply the CFAI Codes and Standards to various real-world situations. You will learn about the ethical decision-making process and readily identify where particular Codes and Standards are considered relevant.
CFA Ethics Level 2 Sample Questions and Answers
These sample questions here are typical of the L2 exam’s complexity and depth – formatted as item sets, with a vignette to deliver a scenario that tests the CFA L2 curriculum. On the actual exam, each vignette applies to 4 questions. We’ve provided a few extra questions for you to practice with. Be sure to review the illustrated answer explanations we’ve provided for each question. UWorld’s QBank is designed to expose you to exam-like questions and explain the concepts tested thoroughly.
Do Universal’s personal transaction disclosure policies comply with CFA Institute’s required and recommended procedures?
- No.
- Yes, since no disclosure is required.
- Yes, since they meet the minimum disclosure requirements.
Which of Universal’s procedures for personal investing by employees is inconsistent with CFA Institute’s required and recommended procedures?
- There is no preclearance requirement.
- Transaction and holdings disclosures are not frequent enough.
- The blackout period is insufficient to prevent front-running of client trades.
According to Standard VI(B) Priority of Transactions, when Martin bought shares of Vent, he most likely:
- violated the Standards.
- did not violate the Standards since the trade was outside the blackout period.
- did not violate the Standards since the transaction was in a different market than client transactions.
Latest Changes in the Level 3 Curriculum
For the 2025 CFA Program Level III, CFA Institute has introduced substantial enhancements and expansions, marking one of the most significant developments since the program’s inception. This year features the debut of specialized pathways in Private Wealth, Private Markets, and Portfolio Management, allowing you to tailor your learning to align closely with your career aspirations. Each pathway builds on a robust common core, enriched with specialized content designed to deepen expertise in your chosen area. As you delve into these new pathways, detailed descriptions of each can be found seamlessly integrated within our Level 3 curriculum topic outline guide.
Frequently Asked Questions (FAQs)
How can I study Ethics for CFA?
Once you’ve mastered the Standards, discussing Ethics is a natural next step. Apply the 7 Standards to see if 1 of them is being broken.
How do I practice CFA Ethics questions?
Do the CFA’s End Of Chapter (EOC) questions along with any questions in the EcoSystem. Beyond that, we highly recommend going through UWorld’s Learning QBank, which is known for intuitively explaining Ethics to raise test scores.
What is the difference between Professional Standards and Professional Ethics?
Whatever the level of the CFA program, Ethics is a difficult subject. It should not be mistaken with common sense or being a “good” person, as there are numerous particular instances in finance that necessitate a much more in-depth understanding.
Why do I need to study Ethics?
Remember that the exam is not testing your personal behavior but your ability to apply the Standards as a member of the investment profession. The ethical decisions that you make as a Charterholder may not be so clear and easy.
