CFA® Ethics

Summary, Syllabus, Topics, and Sample Questions (L1, L2, L3)

The CFA® Ethics 2023 curriculum covers the CFA Institute Code of Ethics and Standards of Professional Conduct and their application to real-world ethical situations faced by professionals. Ethics is the most heavily weighted topic on the CFA Level 1 exam and remains critical through Levels 2 and 3.

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 subjectivity of the questions and the complexity of the material. Aside from its importance throughout each level of the CFA, Ethics is unique for the ‘Ethics adjustment’ implemented by the CFA Institute. If a candidate is on the edge of failing, a strong Ethics score may warrant a pass.

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Study Tips for CFA Ethics

1. Read the question carefully and highlight key details

Pay close attention to the anecdote in the question. Frequently, a candidate makes mistakes by forgetting key phrases such as 'always,' 'never,' or 'didn't. You'll want to return to the “story” after reading each question and note keywords and phrases.

2. Be sure you understand what is being asked

Most Ethics questions test the Standards by presenting a scenario and asking candidates to identify a violation, explain how an action is a violation, or identify an appropriate course of action.

3. Make sure you read the Ethics section several times

Ethics questions are nuanced and confusing, and settling on the correct answer takes time. The good news is that once you've done so, you'll be rewarded in Levels 2 and 3. Much of the Ethics content is the same at all levels. It will take some repetition to get you to think about it the right way. Instead of cramming it all in at the end, try doing some questions every day for a few weeks.

4. Understand the differences between the seven Professional Conduct Standards and the six Codes of Ethics

The curriculum defines a code of ethics as a general guideline for behavior, while standards of conduct are more specific recommendations of what constitutes “minimally acceptable behavior.”

You must distinguish between the CFA Code of Ethics and the Standards. The following are the six Codes of Ethics:

  1. Act with integrity and in an ethical manner
  2. Place the profession and interest of clients over personal interest.
  3. Conduct all professional activities (such as investment analysis, recommendations, etc.) with reasonable care and independent judgment.
  4. Work in a professional manner and encourage others to do so.
  5. Promote the integrity of capital markets and support the rules governing the markets
  6. Maintain and improve professional competence

Here are the seven primary Professional Conduct Standards (there are 22 subsections in total, which are not listed)

  1. Professionalism (A)-(D)
  2. Integrity of capital markets (A)-(B)
  3. Duties to clients (A)-(E)
  4. Duties to employers (A)-(C)
  5. Investment analysis, recommendations, and actions (A)-(C)
  6. Conflicts of interest (A)-(C)
  7. Responsibilities as a CFA Institute member or CFA candidate (A)-(B)

5. Don't rely on memorization alone

Because some industry-specific scenarios (such as the Standards and Codes) are challenging to generalize, CFA Level 1 Ethics requires a little more knowledge. But you don't need to memorize things like the numbering of the Standards. Instead, you should figure out how the reasoning works, such as what is allowed and what is not allowed.

6. Don't rely on “being ethical”

Many candidates make the mistake of thinking that because they are ethical and behave ethically, they do not need to study. Or that Ethics is the least important material to invest time in; instead, they can skim the learning modules right before the exam. Remember that CFA Institute is not testing you but your ability to identify ethical standards, apply them appropriately, and avoid violating them. You must be familiar with the Standards and their applications in the investment profession. And keep in mind that Ethics is the largest single topic area on the L1 exam.

7. It's a Must to Do a Lot of Ethics Practice Questions

Answering Ethics questions requires familiarity with both the question style and the source material — knowing what keywords to avoid, predicting typical pitfalls, and sifting out extraneous data.

  • Practicing a large number of questions ahead of time will help you avoid any unpleasant shocks on the exam.
  • Read all of the Ethics practice questions and answers in the CFA curriculum. Learn how rules are interpreted and applied.
  • Complete all the 'blue box' questions before moving on to the End of Chapter (EOC) questions.
  • For further questions, check out the CFA Institute's online Learning Ecosystem and Standards of Practice Manual.
  • Then, if you have time, review them again before looking at UWorld’s Qbank.
  • It is better to comprehend the theory, return to the CFA curriculum notes and revisit relevant sections to reinforce your CFA Ethics knowledge.
  • Also, complete as many Ethics questions as possible, then read the explanation solutions for correct and incorrect answers. Slowly but steadily, you'll get the hang of it, honing your "ethical intuition" along the way.

8. If you have time, make summary notes or flashcards

This helps you save time throughout the practice questions phase and when swiftly revising Ethics subjects. It also saves a lot of time for Levels 2 and 3 when you should be focusing on more complex topics.

For more information, visit our CFA Level 1 Study Guide and Level 2 Study Guide

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Frequently Asked Questions

Once you’ve mastered the Standards, discussing Ethics is a natural next step. Apply the seven Standards to see if one of them is being broken. When you look at the examples, you will understand this recommendation.

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. Find out more here about UWorld’s CFA prep platform.

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.

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.

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