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CFA Level I — Ethics Cheatsheet
2025 Curriculum · Volume 10 · Ethical & Professional Standards

Standards I–VII
GIPS

The Code of Ethics — 6 Principles (memorize all)
1Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues, and other participants in the global capital markets.
2Place the integrity of the investment profession and the interests of clients above your own personal interests.
3Use reasonable care and exercise independent professional judgment.
4Practice and encourage others to practice in a professional and ethical manner.
5Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
6Maintain and improve your professional competence and strive to maintain and improve the competence of other investment professionals.

Ethical Decision-Making Framework
1Identify
→
2Consider
→
3Decide & Act
→
4Reflect

Identify: facts, stakeholders, duties, conflicts · Consider: situational influences, biases, alternatives · Reflect: was outcome as anticipated?
Standard I — Professionalism
I(A)Knowledge of the Law
  • Must know and comply with all applicable laws & regulations
  • Follow the strictest applicable law (local law, CFA Standards, employer policy)
  • If conflict: stricter standard applies; dissociate if violation occurs
  • Dissociation may require resignation; document and report violations
Key rule: highest requirement = most strict law OR Code & Standards

I(B)Independence & Objectivity
  • Don’t accept gifts/benefits that could compromise objectivity
  • Modest gifts from clients OK; gifts from issuers = problematic
  • Travel paid by external manager → use commercial transport instead
  • Issuer-paid research must be disclosed; flat fee preferred over contingent
  • Resist pressure from employers, clients, or subject companies
Test: would a reasonable person view this as compromising independence?

I(C)Misrepresentation
  • No false, misleading, or omitted facts in communications
  • No plagiarism — cite all sources; models/analyses = intellectual property
  • No guaranteeing investment returns
  • Performance must include all accounts (no cherry-picking)
  • Correct known errors; unintentional errors must still be corrected
I(D)Misconduct
  • No acts of dishonesty, fraud, deceit, or that reflect adversely on profession
  • Personal conduct (outside work) can still violate if it reflects on integrity
  • DUI, theft, lying on application = misconduct
I(E)Competence
  • Must maintain and improve professional competence
  • Seek help or disclose limitations when taking on unfamiliar roles
  • Understand new products/instruments before using in client portfolios

Standard II — Integrity of Capital Markets
II(A)Material Nonpublic Information (MNPI)
  • Material = reasonable investor would consider it significant
  • Nonpublic = not disseminated to the marketplace
  • Do NOT trade or cause others to trade on MNPI
  • Mosaic Theory: combining public + non-material nonpublic info is allowed
  • Use information barriers (“Chinese walls”) to prevent leakage
  • Expert networks: OK if consultant shares only public info; NOT if insider info
Mosaic Theory = public info + non-material nonpublic info → OK to trade on conclusions

II(B)Market Manipulation
  • No actions to artificially inflate or deflate prices
  • No spreading false or misleading information
  • No “pump and dump” schemes
  • Transactions based on genuine analysis ≠ manipulation
  • High-volume trading to mislead others on activity level = violation

Standard III — Duties to Clients
III(A)Loyalty, Prudence & Care
  • Client interests come first — always
  • Identify who the client is (plan sponsor vs. beneficiaries)
  • Soft dollars/commissions must benefit the client
  • No churning (excessive trading for commissions)
  • Vote proxies in clients’ best interest
III(B)Fair Dealing
  • Treat all clients fairly — not necessarily equally
  • Disseminate recommendations simultaneously to all clients
  • Allocate IPOs / block trades pro-rata
  • Different service levels are OK if disclosed
  • No selective disclosure — no favoring certain clients first
III(C)Suitability
  • Know your client: risk, return, objectives, constraints, time horizon, taxes
  • Maintain and update Investment Policy Statement (IPS)
  • Consider investment in context of total portfolio
  • If managing to a mandate/index, no need to assess individual suitability
III(D)Performance Presentation
  • Performance must be fair, accurate, complete
  • No cherry-picking periods or accounts
  • Disclose model/simulated results as such
  • Include terminated accounts in historical record
  • GIPS compliance = best practice
III(E)Preservation of Confidentiality
  • Keep client info confidential — even after relationship ends
  • Exceptions: illegal activity, legal obligation, client permission
  • May disclose illegal activity to CFA Institute or authorities

Standard IV — Duties to Employers
IV(A)Loyalty
  • Act for the benefit of employer; don’t harm employer
  • Don’t take employer records, files, or client lists when leaving
  • Whistleblowing to protect clients or market integrity is permitted
  • Can prepare to start competing firm on personal time, without firm resources
  • Soliciting former clients: only after departure (using publicly available info)
IV(B)Additional Compensation Arrangements
  • Don’t accept comp that competes or creates conflict without written consent
  • Disclose all outside compensation arrangements to employer
  • Verbal notice → written is best practice
IV(C)Responsibilities of Supervisors
  • Must supervise subordinates to prevent Code & Standards violations
  • If no compliance system: decline supervisory responsibility until fixed
  • When violation found: investigate thoroughly, increase monitoring
  • Can delegate tasks, but cannot delegate responsibility

Standard V — Investment Analysis, Recommendations & Actions
V(A)Diligence & Reasonable Basis
  • Must have thorough, independent analysis before recommending
  • Quantitative models: must understand assumptions and limitations
  • Relying on 3rd-party research: assess their quality and process
  • Group research: can dissent; if name on report, must have reasonable basis
  • Due diligence for submanager selection also required
V(B)Communication with Clients
  • Distinguish facts from opinions in communications
  • Disclose investment process, risks, and limitations
  • Notify clients of significant changes to process or personnel
  • Disclose fee changes promptly
  • Use clear, accurate language — no misleading or incomplete info
V(C)Record Retention
  • Retain records supporting investment analysis and recommendations
  • Recommended: 7 years (absent regulatory guidance)
  • Records belong to the firm, not the employee

Standard VI — Conflicts of Interest
VI(A)Avoid or Disclose Conflicts
  • Disclose all actual or potential conflicts of interest
  • Stock ownership in covered companies must be disclosed
  • Compensation arrangements that create conflicts must be disclosed
  • Board membership: potential conflict; disclose to employer & clients
VI(B)Priority of Transactions
  • Client transactions before employer or personal transactions
  • Family member accounts treated as normal client accounts
  • No front-running: don’t trade personal account before client order
  • Blackout periods recommended around client transactions
VI(C)Referral Fees
  • Disclose all referral arrangements to clients and employer
  • Must disclose before or at time of referral
  • Allows clients to evaluate objectivity of recommendation
Priority order: Clients → Employer → Member/Candidate personal

Standard VII — Responsibilities as CFA Member / Candidate
VII(A)Conduct as CFA Participants
  • Don’t compromise the integrity of the CFA exam
  • No sharing exam questions or content during or after exam
  • No cheating: writing after time, bringing prohibited materials
  • Broad topic areas can be discussed; specific questions cannot
VII(B)Reference to CFA Designation
  • Don’t misrepresent or exaggerate meaning of CFA designation
  • “CFA” is an adjective, not a noun: “I am a CFA charterholder” ✓
  • Candidates can state “CFA Level I candidate” — not “CFA Level I”
  • Don’t imply partial completion = partial designation

GIPS — Global Investment Performance Standards
Why GIPS exists
  • Prevent survivorship bias & cherry-picking
  • Standardize performance reporting globally
  • Enable apples-to-apples comparison across firms
Who claims compliance
  • Firms claim compliance — not individuals
  • Composite must include ALL fee-paying discretionary accounts
  • Terminated accounts must be included historically
Key requirements
  • 5-year minimum record (or since inception)
  • Build to 10-year record over time
  • Verification is voluntary (by independent 3rd party)
  • Composite = grouping of similar mandates/strategies

High-Frequency Exam Traps
Legal vs. ethical
  • Something legal can still violate Code & Standards
  • Something illegal can be ethical (civil disobedience)
  • CFA standard is often stricter than local law
Situational influences
  • Money, prestige, loyalty = powerful situational biases
  • Overconfidence: people overestimate their own ethics
  • Ask “What should I do?” not “What can I do?”
Common distinctions
Mosaic theoryPublic + non-material NP → OK
Soft dollarMust benefit client
Front-runningTrade ahead of client = violation
SuitabilityTotal portfolio context required
Record retention7 years; firm owns records
Referral disclosureMust disclose at/before referral
GIPS verificationVoluntary, not mandatory
IPO allocationPro-rata across eligible clients

Remember the hierarchy: When standards conflict — apply the most strict. Client interests > Employer interests > Personal interests. When in doubt: disclose, dissociate, or seek legal/compliance guidance.