CFA Level 1 Ethics Cheat Sheet: Code & Standards Guide

Ethics represents 15-20% of CFA Level 1 (27-36 questions) and uses identical content across all three levels, making it highly efficient to master.

This CFA Level 1 Ethics cheat sheet covers the 6 Code of Ethics components, all 7 Standards of Professional Conduct with 22 sub-standards, GIPS basics, and exam strategies.

Key insight: Ethics can determine pass/fail for borderline candidates through the “ethics adjustment” – CFA Institute reviews borderline candidates’ Ethics scores before making final decisions.

CFA Ethics is the most strategically valuable topic across all three CFA levels: identical content tested at 15-20% weight for Level 1, 10-15% for Levels 2-3, meaning knowledge mastered once applies to all three exams. This cheat sheet condenses the Code of Ethics, Standards of Professional Conduct, and GIPS introduction into quick-reference tables and exam strategies.

What’s covered: ☕ The 6 Code of Ethics components, all 7 Standards of Professional Conduct (with 22 sub-standards), Global Investment Performance Standards (GIPS) fundamentals, and how to approach scenario-based Ethics questions. For Level 1, this represents 27-36 questions of the 180-question exam.

Why Ethics matters beyond its weight:

• Ethics adjustment for borderline candidates: CFA Institute reviews borderline candidates’ Ethics performance before making pass/fail decisions. Strong Ethics scores can tip marginal candidates into passing.
• Transferable across levels: The Code and Standards tested at Level 1 are identical in Levels 2-3 (only application complexity increases). Time invested in Level 1 pays dividends across all three exams.
• Effort-efficient mastery: Ethics requires 35-45 study hours despite 15-20% weight – lower time investment per percentage point than most topics, yet delivers exam insurance through the ethics adjustment.

How to use this cheat sheet: Use the Standards tables as your primary reference when reviewing practice questions. After reading a scenario, identify which Standard(s) apply before checking the answer. The GIPS section covers Level 1 fundamentals – deeper GIPS content appears in Level 3.

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What is the CFA Code of Ethics and Standards of Professional Conduct?

The Code of Ethics and Standards of Professional Conduct form the ethical foundation for investment professionals worldwide. They set the standard for ethical behavior in investment analysis, portfolio management, client relations, and professional responsibilities.

The Code of Ethics provides six aspirational principles describing ideal conduct for investment professionals. These are broad ethical guidelines that establish the profession’s values.

The Standards of Professional Conduct translate these principles into 22 specific, enforceable rules organized under 7 main Standards. While the Code describes what we should strive for, the Standards define what we must do (or must not do) to maintain professional standing.

Why it matters: All CFA Institute members, CFA charterholders, and CFA candidates must comply with the Code and Standards. Violations can result in disciplinary sanctions including public censure, suspension, or revocation of charter/membership. For candidates, violations can result in exam disqualification or prohibition from future CFA Program participation.

Key principle: When multiple rules or laws conflict, always comply with the strictest applicable law or standard. The Standards represent minimum acceptable behavior – members should strive to exceed these requirements when possible.

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CFA Level 1 Ethics: An Overview

Ethics is present in all 3 levels of the CFA exams and something candidates need to master for various reasons:

• Significant topic weighting and tested across 3 levels (10-20%).
• Highly transferable knowledge across 3 levels: CFA Ethics works on the same base knowledge of Code and Standards for all 3 levels. This means what you’ve learnt in Level 1 will still be applicable in Level 3 questions. Combine that with the relatively little amount of time needed to master Ethics, suddenly you have a very effort-efficient topic in your hands.
• Ethics adjustment which matters to your CFA exam pass/fail decision if you are a borderline case.

2026 CFA Level 1 Ethics’ topic weighting is 15%-20%, which means 27-36 questions of the 180 questions of CFA Level 1 exam is centered around this topic.

It is covered in Topic 10 which contains 5 Learning Modules (LMs).

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Learning Module	Sub-topic	Description
1	Ethics and Trust in the Investment Profession	An introduction to Ethics and why a high level of ethical standard is needed in investment management. This LM is not covered in our summary notes below given its introductory nature.
2	Code of Ethics and Standards of Professional Conduct	The key to know here is the 6 components of Code of Ethics and 7 Standards of Professional Conduct.
3	Guidance for Standards I–VII	The main section you need to master of all the Ethics readings, as it goes through the details of each Standard.
4	Introduction to the Global Investment Performance Standards (GIPS)	An introduction to GIPS: why it was created, to whom in applies to, how to verify GIPS compliance.
5	Ethics Application	A new chapter that goes through lots of examples of ethics in practice. This LM is not covered in our summary notes below as it is filled with examples, but do use it for your practice to learn how to answer CFA ethics questions!

CFA Level 1 Ethics is focused on educating candidates on the CFA Institute’s Code of Ethics & Standards of Professional Conduct, an ethical benchmark for investment professionals worldwide.

Equally important is also the Global Investment Performance Standards (GIPS), which is the standard on how firms are supposed to record, compare and present investment performance.

CFA Ethics, in a nutshell, is there to teach you:

– how investment managers should conduct themselves.
– how firms should represent their investment performance.

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LM2: Code of Ethics and Standards of Professional Conduct

6 Code of Ethics

1. Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
2. Place the integrity of the investment profession and the interests of clients above their own personal interests.
3. Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
4. Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
5. Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
6. Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

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7 Standards of Professional Conduct

Yes, you need to know all of these 22 Standards and sub-sections in details, plus their applications (see next LM).

1. Professionalism
   • A) Knowledge of the Law
   • B) Independence and Objectivity
   • C) Misrepresentation
   • D) Misconduct
2. Integrity of Capital Markets
   • A) Material Nonpublic Information
   • B) Market Manipulation
3. Duties to Clients
   • A) Loyalty, Prudence, and Care
   • B) Fair Dealing
   • C) Suitability
   • D) Performance Presentation
   • E) Preservation of Confidentiality
4. Duties to Employers
   • A) Loyalty
   • B) Additional Compensation Arrangements
   • C) Responsibilities of Supervisors
5. Investment Analysis, Recommendations and Actions
   • A) Diligence and Reasonable Basis.
   • B) Communication with Clients and Prospective Clients
   • C) Record Retention
6. Conflicts of Interest
   • A) Disclosure of Conflicts
   • B) Priority of Transactions
   • C) Referral Fees
7. Responsibilities as a CFA Institute Member, or CFA Candidate
   • A) Conduct as Members and Candidates in the CFA Program
   • B) Reference to CFA Institute, the CFA Designation, and the CFA Program

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LM3: Guidance for Standards I–VII

Standard 1: Professionalism

Standard’s name	Description
1(A): Knowledge of the Law	Understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. Note that: – In the event of conflict, comply with the strictest, applicable law to the situation. – Basically do not associate yourself with law-breakers. – You must be aware of the all laws where you conduct business. Stating that you’re not aware of the law, hence a violation, is not an acceptable excuse.
1(B): Independence and Objectivity	Use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. Must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity.
1(C): Misrepresentation	Must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities. For example, if an external source is used in a report, please cite it.
1(D): Misconduct	Must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence. Note that if a member/candidate declares personal bankruptcy, it is NOT a misconduct per se. However if the reason of bankruptcy was due to deceit or fraud, that would be a violation and deemed as a misconduct. Personal issues that reflect poorly on professional reputation/competence is deemed a misconduct.

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Standard 2: Integrity of Capital Markets

Standard’s name	Description
2(A): Material Nonpublic Information	Members and candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information. Material information is information that can have an impact on the price of a security, or something an investor wants to know before making an investment decision. Nonpublic information is simply information that has not been made public. Analysts are free to act on public and non-material, nonpublic information without risking violation (mosaic theory).
2(B): Market Manipulation	Must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants. Misleading investors by distorting prices (transaction based manipulation) or with false information (information-based manipulation) are not allowed.

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Standard 3: Duties to Clients

Standard’s name	Description
3(A): Loyalty, Prudence, and Care	Members/candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. Must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests. Clients come first!
3(B): Fair Dealing	Members and candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities. Communicate investment recommendations and changes simultaneously.
3(C): Suitability	1) When members and candidates are in an advisory relationship with a client, they must: – Make a reasonable inquiry into a client’s or prospective client’s investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation or taking investment action and must reassess and update this information regularly. – Determine that an investment is suitable to the client’s financial situation and consistent with the client’s written objectives, mandates, and constraints before making an investment recommendation or taking investment action. – Judge the suitability of investments in the context of the client’s total portfolio. 2) When members and candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must only make investment recommendations or take investment actions that are consistent with the stated objectives and constraints of that portfolio. Remember it is not the responsibility of the sell-side analyst (who make recommendations) to determine suitability of investments for your client. Use regularly updated IPS (updated at least once a year) when making investment decisions.
3(D): Performance Presentation	When communicating investment performance information, members or candidates must make reasonable efforts to ensure that it is fair, accurate, and complete. The key here is not to misrepresent past performance, nor promise any future performances.
3(E): Preservation of Confidentiality	Members and candidates must keep information about current, former, and prospective clients confidential unless: – The information concerns illegal activities on the part of the client or prospective client, – Disclosure is required by law, or – The client or prospective client permits disclosure of the information.

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Standard 4: Duties to Employers

Standard’s name	Description
4(A): Loyalty	In matters related to their employment, members and candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information, or otherwise cause harm to their employer. Understand what you can or cannot do once leaving (or after leaving) an employer. For example, knowing the names of former clients is not confidential, but one must not use any records or work stored in paper/electronic format from previous firm.
4(B): Additional Compensation Arrangements	Must not accept gifts, benefits, compensation, or consideration that competes with, or might reasonably be expected to create a conflict of interest with, their employer’s interests unless they obtain written consent from all parties involved. Best to obtain employer’s permission before accepting cash or significant perks. Token gifts (of not significant value) such as a pen does not need permission.
4(C): Responsibilities of Supervisors	Must make reasonable efforts to detect and prevent violations of applicable laws, rules, regulations, and the Code and Standards by anyone subject to their supervision or authority. That said, supervisors’ are not responsible for their subordinates’ behavior.

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Standard 5: Investment Analysis, Recommendations and Actions

Standard’s name	Description
5(A): Diligence and Reasonable Basis	Members and candidates must: – Exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions. – Have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action.
5(B): Communication with Clients and Prospective Clients	Members and candidates must: – Disclose to clients and prospective clients the basic format and general principles of the investment processes used to analyze investments, select securities, and construct portfolios, and must promptly disclose any changes that might materially affect those processes. – Use reasonable judgment in identifying which factors are important to their investment analyses, recommendations, or actions and include those factors in communications with clients and prospective clients. – Distinguish between fact and opinion in the presentation of investment analysis and recommendations.
5(C): Record Retention	Must develop and maintain appropriate records to support their investment analysis, recommendations, actions, and other investment-related communications with clients and prospective clients.

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Standard 6: Conflicts of Interest

Standard’s name	Description
6(A): Disclosure of Conflicts	Must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and employer. Must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively.
6(B): Priority of Transactions	Investment transactions for clients and employers must have priority over investment transactions in which a member or candidate is the beneficial owner.
6(C): Referral Fees	Must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services.

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Standard 7: Responsibilities as a CFA Institute Member, or CFA Candidate

Standard’s name	Description
7(A): Conduct as Members and Candidates in the CFA Program	Members and candidates must not engage in any conduct that compromises the reputation or integrity of CFA Institute or the CFA designation or the integrity, validity, or security of the CFA examinations. Basically do not discuss/share confidential questions tested in the actual exams.
7(B): Reference to CFA Institute, the CFA Designation, and the CFA Program	When referring to CFA Institute, CFA Institute membership, the CFA designation, or candidacy in the CFA Program, members and candidates must not misrepresent or exaggerate the meaning or implications of membership in CFA Institute, holding the CFA designation, or candidacy in the CFA program.

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LM4: Introduction to the Global Investment Performance Standards (GIPS)

Why was GIPS created?

• The 2020 GIPS standards has 3 chapters:
  • GIPS Standards for Firms – CFA Institute recommends that candidates read the this specific section in the latest 2020 GIPS standards.
  • GIPS Standards for Asset Owners
  • GIPS Standards for Verifiers
• GIPS was created to make it easier to compare historical performances between different investment firms, to ensure fair representation and full disclosure of investment performance.
• In absence of GIPS, these misleading practices are more likely to occur:
  • Representative accounts: Selecting a top-performing portfolio to represent the firm’s overall investment results for a specific mandate.
  • Survivorship bias: Presenting an “average” performance history that excludes portfolios whose poor performance was weak enough to result in termination of the firm.
  • Varying time periods: Presenting performance for a selected time period during which the mandate produced excellent returns or out-performed its benchmark—making comparison with other firms’ results difficult or impossible.

Who can claim compliance?

• Any firm that actually manages assets may choose to comply with the GIPS standards. That said, firms that compete for business must comply with the GIPS Standards for Firms.
• Consultants cannot make a claim of compliance unless they actually manage assets for which they are making a claim of compliance.
• Similarly, software (and the vendors who supply software) cannot be “compliant.” Only a firm managing assets can claim compliance once the firm has satisfied all requirements of the standards.
• Asset owners may comply with the GIPS standards in the same way as firms if they compete for business.
• To claim GIPS compliance, a firm must fully comply with all GIPS requirements at a firm-wide basis, not a single product or composite level.
• Complying with the GIPS standards is voluntary.

Composites

• A composite must include all actual fee-paying, discretionary portfolios managed according to the same mandate, objective or strategy.
  • Fee paying means you should exclude clients (e.g. charity) which pays no fees.
  • Discretionary means the investment management firm has the power to determine and purchase suitable securities for the portfolio, not client-directed.
• A claim of compliance requires that all fee-paying discretionary accounts managed by the firm be included in at least one composite.

Verification

• Firms that claim compliance with the GIPS standards are responsible for their claim of compliance and for maintaining that compliance, i.e. it is self-regulating.
• Verification is performed with respect to an entire firm, not on specific composites.
• Third-party verification of GIPS compliance is optional, although it would bring additional credibility to a firm’s claim of compliance.

📌 GIPS CFA Level 1 Essentials (Don’t Overcomplicate)

For Level 1, know these 5 points:

1. Purpose: Fair performance presentation, prevent cherry-picking
2. Who complies: Firms competing for business (not consultants, not software)
3. Scope: Firm-wide compliance (not individual composite compliance)
4. Verification: Optional, performed by third party, firm-wide (not composite-specific)
5. Composites: Must include all fee-paying discretionary accounts for each strategy

Save the detailed GIPS calculations for Level 3. Level 1 is conceptual only.

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How to approach CFA Ethics exam questions: A step-by-step framework

Ethics questions follow a predictable scenario-based format. Master this framework to improve accuracy and speed:

The 4-step ethics question framework

Step 1: Identify the actors and their roles

• Who is the member/candidate in the scenario?
• What is their role (analyst, portfolio manager, supervisor)?
• Who are the other parties (clients, employers, third parties)?

Step 2: Identify potential violations

• Which Standard(s) might be violated?
• What specific action triggered the potential violation?
• Are there multiple Standards at play?

Step 3: Determine if a violation occurred

• Did the member/candidate’s action violate the identified Standard?
• Were there mitigating factors (disclosure, consent, reasonable basis)?
• Does the action meet the “recommended” or “required” procedures?

Step 4: Identify the correct course of action

• What should the member/candidate have done instead?
• What must they do to remediate the violation?
• What procedures would have prevented the violation?

Common ethics question traps

Trap 1: “Not a violation because…”
Exam writers often present seemingly valid excuses that don’t actually justify violations:

• “I didn’t know the client would act on the information” → Still violates if material nonpublic
• “The gift was only $500” → Still requires disclosure if could reasonably compromise objectivity
• “I properly supervised my team” → Still violated if you didn’t detect/prevent subordinate violations

Trap 2: The “technically compliant but ethically questionable” answer
The Standards represent minimum requirements. The exam may present:

• An answer that narrowly avoids a violation but is ethically dubious
• An answer that goes beyond minimum requirements to best serve clients

Choose the answer that best upholds the Code and Standards, even if a weaker answer “technically” complies.

Trap 3: Confusing similar Standards
Watch for scenarios that test your ability to distinguish between:

• Standard I(A) Knowledge of Law vs Standard I(D) Misconduct
• Standard III(A) Loyalty to Clients vs Standard IV(A) Loyalty to Employer
• Standard VI(A) Disclosure of Conflicts vs Standard VI(C) Referral Fees
• Standard II(A) Material Nonpublic Information vs Standard III(E) Confidentiality

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Focus areas: Standards emphasized in CFA Curriculum and practice materials

Based on the CFA Institute curriculum emphasis (Learning Outcome Statement weighting), prep provider question banks, and the Standards’ real-world application frequency, these Standards receive disproportionate attention:

Heavily emphasized in CFA Curriculum:

• Standard I(B): Independence and Objectivity (extensive guidance, multiple application scenarios)
• Standard III(A): Loyalty, Prudence, and Care (fundamental to asset management)
• Standard III(B): Fair Dealing (critical for client relationships)
• Standard V(A): Diligence and Reasonable Basis (foundation of investment analysis)

Frequently tested in practice materials:
(Based on third-party prep provider question banks like Kaplan Schweser, UWorld, and CFA Institute’s online practice questions)

• Standard II(A): Material Nonpublic Information (complex scenarios, mosaic theory applications)
• Standard III(C): Suitability (IPS scenarios, multi-factor analysis)
• Standard IV(A): Loyalty to Employer (employment transition scenarios)
• Standard VI(A): Disclosure of Conflicts

Moderate coverage:

• Standard I(C): Misrepresentation (plagiarism, citing sources)
• Standard I(D): Misconduct (personal vs professional conduct boundary)
• Standard IV(C): Responsibilities of Supervisors (compliance system scenarios)
• Standard VI(B): Priority of Transactions (personal trading restrictions)

Note: All 22 sub-standards are testable. This categorization reflects curriculum emphasis and practice material frequency, not actual exam question distribution, which CFA Institute does not disclose.

Time-saving strategies

Strategy 1: Eliminate obviously wrong answers first
Ethics questions typically include 1-2 clearly incorrect answers. Eliminate these immediately to increase your odds on 50/50 guesses.

Strategy 2: Look for absolute language
Answers with “always,” “never,” “must,” or “cannot” are often wrong. The Standards recognize that context matters – few things in ethics are absolute.

Strategy 3: When in doubt, choose the answer that best protects clients
Standard III(A) establishes that client interests come first. When torn between two plausible answers, choose the one that better serves client interests.

Strategy 4: Read every answer choice completely
Ethics questions often present multiple partially correct answers. The best answer usually contains more complete or more appropriate actions than alternative answers.

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CFA Level 1 Ethics Tips

Talking about Ethics tips warrants a separate article in itself, because there is so much to cover.

Check out our top 10 tips for CFA Ethics for all levels to learn tried-and-tested strategies to ace this topic!

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Frequently asked questions about CFA Level 1 Ethics

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