| 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 2026 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). | ||
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 2026 Syllabus, Readings, and Changes
| No. of Learning Modules – 3 | No. of LOS – 6 | |
|---|---|---|
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. | ||
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.
What to Expect in CFA Level 3 Ethics?
CFA Level 3 Ethics is one of the most heavily weighted topics on the exam, with a weighting of 10-15%. The topic material reiterates and expands on content from the CFA Level 1 and Level 2 Ethics. However, there are two additional sections:
- Asset Manager Code of Professional Conduct
- Global Investment Performance Standards (GIPS)
Level 3 questions are mixed between “constructed response” (essay) and 44 item-set, multiple-choice questions. The exam tests the candidates’ ability to apply ethical frameworks to complex situations and explain the reasoning behind their conclusions.
Level 3 Ethics 2026 Syllabus, Readings, and Changes
The CFA Level 3 Ethics topic has a weighting of 10-15%. There could be a blend of item set questions (44 total) and constructed response (essay) questions.
Code of Ethics and Standards of Professional Conduct
At this point, candidates should be familiar with the Standards of Practice Handbook and how to apply its content to real ethical dilemmas faced by investment professionals on a daily basis. This reading will focus more on procedures for preventing Ethics violations and the application of concepts to more complex situations.
Guidance for Standards I–VII
Candidates must demonstrate their knowledge of the CFA Institute Code of Ethics and Standards of Professional Conduct through its application. The seven standards were presented in the “Guidance for Standards I–VII” section for Level 1.
Application of the Code and Standards: Level III
Like the related sections in CFA Level 1 and Level 2 Ethics, this reading will show how to apply the CFAI Codes and Standards to various real-world situations. Candidates will learn about the ethical decision-making process and readily identify where particular Codes and Standards are considered relevant.
Asset Manager Code of Professional Conduct
The CFA Institute Asset Manager Code enumerates the ethical responsibilities regarding asset management. The six categories are:
- Loyalty to clients
- Investment process and actions
- Trading
- Risk Management, compliance, and support
- Performance reporting and valuation
- Disclosures
Organizations typically have unique standards of conduct. The CFA Institute Asset Manager Code makes it easy for clients to identify which organizations follow a particular set of ethical principles. The reading introduces candidates to this code, how to follow it, and why it is important.
Overview of the Global Investment Performance Standards (GIPS)
Candidates will be familiar with GIPS from the related Level 1 reading. GIPS is a voluntary ethical guideline for reporting investment performance, designed by CFA Institute in partnership with GIPS Standards sponsors and industry experts. Investment firms and asset owners abide by GIPS as a pledge of ethical integrity and transparency to investors.
Candidates will learn more about the valuation hierarchy of the GIPS standards, the role of investment mandates and objectives, and the need for globally accepted standards for investment management firms.
How to Study for CFA Ethics?
The tips below outline the most effective ways to study Ethics and avoid common pitfalls candidates face on exam day.
Read the question carefully and pay attention to key details
Ethics questions often hinge on subtle keywords such as “always,” “never,” or “failed to.” Carefully highlight important phrases and revisit the scenario after reading each question. Missing a single detail can completely change whether a violation has occurred.
Understand exactly what the question is asking
Most Ethics questions test your ability to identify violations, determine the appropriate course of action, or apply the Standards correctly. Focus on interpreting the scenario rather than recalling definitions.
Review the Ethics material multiple times
Ethics is nuanced and requires repetition to internalize. Because the Standards remain consistent across Levels 1–3, time invested early pays off later. Instead of cramming before the exam, do a few Ethics questions daily over several weeks to build familiarity with common patterns.
Know the difference between the Code of Ethics and the Standards of Professional Conduct
The Code of Ethics provides broad principles guiding ethical behavior, while the Standards outline specific, minimum expectations for professional conduct. Candidates should understand both conceptually:
- The six Codes of Ethics set general ethical principles.
- The seven Standards of Professional Conduct (with 22 subsections) specify required behaviors across professionalism, capital markets integrity, duties to clients and employers, investment recommendations, conflicts of interest, and responsibilities of CFA members and candidates.
Do not rely on memorization alone
Ethics is application-based. Memorizing numbering or subsections won’t help much on exam day. Instead, focus on recognizing what is allowed, what is required, and what constitutes a violation in context.
Don’t assume being ethical is enough
Being a good person does not mean you can correctly answer CFA Ethics questions. The CFA exam tests your ability to apply their specific Standards—not your personal moral compass. Ethics is also one of the highest-weighted sections in Level 1, making it too important to skim.
Practice a large volume of Ethics questions
Ethics mastery comes from exposure to scenarios. Work through CFA curriculum Blue Box examples, End-of-Chapter questions, and items in the Learning Ecosystem. Afterward, use UWorld’s QBank for additional practice and explanations. Read every rationale, even for correct answers, to understand how decisions align with the Standards.
Make summary notes or flashcards if time permits
Creating flashcards or short summaries helps reinforce tricky distinctions, saves time during revision, and provides a major advantage at Levels 2 and 3, where Ethics becomes more subtle and scenario-focused.
Frequently Asked Questions (FAQs)
How can I study Ethics for CFA?
Ethics requires reading, interpreting, and applying the CFA Institute Code and Standards. After understanding each Standard, practice evaluating whether a scenario violates one or more Standards. Application-based learning is the most effective approach because the exam tests interpretation and judgment, not memorization.
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 CFA QBank, which is known for intuitively explaining Ethics to raise test scores.
What is the difference between Professional Standards and Professional Ethics?
Professional Standards outline specific rules, behaviors, and obligations expected of investment professionals, while Professional Ethics refers to the moral principles and decision-making frameworks behind those behaviors. CFA candidates must understand both the letter of the Standards and the ethical reasoning behind them.
Why do I need to study Ethics?
The CFA exam tests your ability to apply the Standards in real professional situations, not your personal values. Ethics is essential because CFA charterholders often face ambiguous situations that require strong judgment, and the Standards provide a consistent framework for making appropriate decisions.
What topics are included in the CFA Ethics syllabus?
The CFA Ethics syllabus includes the CFA Institute Code of Ethics, the Standards of Professional Conduct (Standards I–VII), detailed guidance on how to apply each Standard, responsibilities of CFA Institute members and candidates, Ethical and Professional Standards scenarios, and the Global Investment Performance Standards (GIPS), which appear more prominently at higher levels.
Is CFA Ethics hard?
Yes, CFA Ethics is considered difficult because questions are subtle, scenario-based, and often involve gray areas. The exam tests your ability to interpret complex situations rather than memorize rules, which requires strong reading comprehension, careful judgment, and extensive practice with realistic scenarios.
What is the CFA Ethics adjustment?
The CFA Ethics adjustment is a scoring mechanism where borderline candidates may pass or fail depending on their Ethics performance. If you score near the Minimum Passing Score and demonstrate strong Ethics results, it can boost your overall score; weak Ethics performance can cause you to fall below the passing threshold.
Is Ethics the same across Levels 1, 2, and 3 of the CFA exam?
The core Code of Ethics and Standards of Professional Conduct remain the same across all three levels, but application becomes more nuanced at Level 2 and especially Level 3, where the scenarios involve portfolio management, client relationships, and more complex ethical dilemmas.
How many Ethics questions appear on the CFA exam?
Ethics typically represents 15–20% of the CFA Level 1 and Level 2 exams and 10–15% of the Level 3 exam, making it one of the most heavily weighted topics across the curriculum.
What is the CFA Ethics Adjustment?
The Ethics Adjustment allows the CFA Institute to adjust borderline candidates’ pass or fail results based on their Ethics performance. Strong performance in Ethics can help a candidate pass if their overall score is near the minimum passing score, while weak Ethics performance can negatively affect borderline candidates.
Is CFA Ethics considered hard?
Yes. Ethics is challenging because questions are judgment-based and require careful reading, distinguishing subtle differences in scenarios, and applying Standards precisely rather than relying on memorized rules.
Does CFA Ethics include GIPS?
Yes. GIPS (Global Investment Performance Standards) is included in the Ethics and Professional Standards topic area and is typically tested more heavily at Level 1 and Level 3 due to its emphasis on firm-wide performance reporting and disclosures.
What are the most common mistakes candidates make in CFA Ethics?
Common mistakes include skipping keywords in scenarios, misunderstanding obligations to clients vs employers, confusing suitability with performance reporting requirements, and misinterpreting the distinction between recommended vs required procedures.