CFA Ethics: The “Small” Standards That Repeatedly Decide Pass/Fail

CFA Ethics: The “Small” Standards That Repeatedly Decide Pass/Fail

Why CFA Ethics Repeatedly Decides Pass/Fail

In CFA Level II, “Ethical And Professional Standards” carries an official exam weight range of 10–15%. That percentage understates its real impact in practice: Ethics questions are typically high-density (short facts, multiple possible violations) and are designed to test whether you can spot subtle breaches—small wording differences that change the correct answer.

Also, as a CFA Program candidate, you are required to follow the CFA Institute Code of Ethics and Standards of Professional Conduct. So the topic is both (1) examinable content and (2) a professional obligation tied to program participation.

For SEO completeness, the keyword phrase cfa ethics is included here and used throughout as CFA Ethics.

What Changed Recently In CFA Ethics And Why It Matters

CFA Institute’s Board of Governors approved updates to the Code and Standards effective 1 January 2024. The 2024 Standards of Practice Handbook (12th edition) summarizes three high-impact updates candidates should know:

1. New Standard I(E) Competence: Members and candidates must act with and maintain competence necessary for professional responsibilities.

2. Revised Standard V(B) Communication With Clients And Prospective Clients: Adds an explicit requirement to disclose the nature of services and costs to the client associated with those services.

3. Revised Standard VI(A) Avoid Or Disclose Conflicts: The standard now explicitly requires members and candidates to avoid conflicts when reasonably possible, or otherwise disclose them.

These are exactly the kinds of “small” requirements that become recurring exam differentiators.

The Small CFA Ethics Standards That Create Big Point Swings

Below is a practical “trap map” of the most repeatedly tested, easily-missed Standards—written as exam-ready behaviors. (Use it as a checklist in your review cycle.)

Standard Area	Common Candidate Miss	Exam-Safe Operating Rule
I(A) Knowledge Of The Law	Following local practice even when weaker than the Code	Follow the stricter of applicable law/regulation or the Code and Standards.
I(B) Independence And Objectivity	Assuming “small gifts” never matter	Evaluate whether anything could reasonably impair objectivity; when in doubt, escalate/disclose per firm policy.
I(C) Misrepresentation	Letting marketing language overstate process/results	Do not misstate qualifications, services, performance, or third-party work; correct inaccurate claims.
II(A) Material Nonpublic Information	Trading/acting on “soft” tips because not confirmed	Treat credible nonpublic information as restricted; do not act or cause others to act.
III(B) Fair Dealing	Serving “best clients” first when recommendations change	Ensure fair access to recommendations and actions; do not selectively disseminate.
III(C) Suitability	Jumping to product selection before IPS constraints	Establish suitability and constraints first; only then recommend/act.
V(B) Client Communication	Disclosing a method but not the costs or service nature	Disclose nature of services and costs clearly and prominently.
VI(A) Avoid Or Disclose Conflicts	Treating disclosure as always sufficient	Avoid conflicts when reasonable; otherwise disclose fully and clearly.
IV(C) Responsibilities Of Supervisors	Assuming compliance is “someone else’s job”	Make reasonable efforts to ensure those you supervise comply with law and the Code and Standards.
VII(A) Conduct As Participants In CFA Institute Programs	Treating exam/program integrity rules as separate from Ethics	Program participation conduct is governed under the Standards and is enforced.

A Handbook-Aligned CFA Ethics Decision Checklist

Use this process to answer Ethics vignettes consistently (and to reduce second-guessing):

1. Determine Applicable Law And Rules: identify jurisdictional constraints and firm policies.

2. Apply The “Stricter Standard” Principle: comply with the more strict of law/regulation or the Code and Standards.

3. Classify The Issue Type: conflict, MNPI, misrepresentation, duty to client, duty to employer, market integrity, supervision.

4. Select The Required Action: avoid vs disclose (especially for conflicts), communicate clearly, protect confidentiality, ensure fair dealing.

5. Document And Communicate Properly: the Handbook emphasizes practical conduct requirements and clear communication expectations.

6. Escalate When Needed: consult supervisors/legal/compliance where appropriate; the Handbook discusses consulting compliance/legal to understand responsibilities.

Why These “Small” Standards Matter Beyond The Exam

CFA Institute enforces the Code and Standards through its Professional Conduct Program, and it publicly explains sanctions frameworks and disciplinary disclosures. Even for exam-focused candidates, this is the right mindset: Ethics is not trivia—it is professional conduct expectations that the credential is built on.