CFA Institute Code of Ethics and Standards of Professional Conduct: A Comprehensive Guide

Posted on May 1, 2024 in Law & Jurisprudence

CFA Institute Code of Ethics and Standards of Professional Conduct

LOS 1.a: Components of the Code and Standards

The CFA Institute Code of Ethics outlines six fundamental principles that guide the ethical behavior of its members:

  1. Integrity, Competence, Diligence, Respect, and Ethical Conduct: Members must uphold these values in all professional interactions.
  2. Priority of Client Interests: Client interests must always supersede personal interests.
  3. Professionalism: Members must conduct themselves with the utmost professionalism and encourage others to do the same.
  4. Capital Market Integrity: Members must promote and uphold the rules governing capital markets.
  5. Professional Competence: Members must maintain and enhance their own competence and support the development of other investment professionals.

The seven Standards of Professional Conduct provide specific guidance on ethical behavior:

  1. Professionalism
  2. Integrity of Capital Markets
  3. Duties to Clients
  4. Duties to Employers
  5. Investment Analysis, Recommendations, and Actions
  6. Conflicts of Interest
  7. Responsibilities as a CFA Institute Member or CFA Candidate

LOS 1.b: Ethical Responsibilities

Standard I: Professionalism

  • Knowledge of the Law: Adherence to all applicable laws, rules, and regulations is mandatory.
  • Independence and Objectivity: Members must maintain independence and objectivity in their professional activities and avoid conflicts of interest.
  • Misrepresentation: Any form of misrepresentation is strictly prohibited.
  • Misconduct: Members must refrain from any conduct that could damage their professional reputation or the integrity of the profession.

Standard II: Integrity of Capital Markets

  • Material Nonpublic Information: Members must not act on or share material nonpublic information.
  • Market Manipulation: Engaging in practices that distort market prices or trading volume is prohibited.

Standard III: Duties to Clients

  • Loyalty, Prudence, and Care: Members have a fiduciary duty to act in the best interests of their clients.
  • Fair Dealing: Clients must be treated fairly and objectively.
  • Suitability: Investment recommendations and actions must be suitable for each client’s individual circumstances and investment objectives.
  • Performance Presentation: Investment performance information must be presented fairly, accurately, and completely.
  • Preservation of Confidentiality: Client information must be kept confidential, except in specific circumstances.