CFA Code of Ethics and Standards of Professional Conduct
The CFA Code of Ethics and Standards of Professional Conduct is a critical component of the CFA Program curriculum. It sets forth the ethical principles and standards that guide the professional conduct of CFA charterholders and candidates.
Why is it important?
The Code and Standards help maintain the integrity and credibility of the investment profession. By adhering to these principles, investment professionals demonstrate their commitment to acting ethically and placing the interests of clients above their own.
What is it?
The Code of Ethics outlines the fundamental ethical principles that CFA Institute members and candidates must abide by, such as acting with integrity, competence, diligence, and respect. The Standards of Professional Conduct provide specific guidance on how to apply these principles in practice, covering areas such as professionalism, integrity of capital markets, duties to clients and employers, and conflicts of interest.
How it works:
Investment professionals who are CFA charterholders or candidates must follow the Code and Standards in their professional activities. This includes making ethical decisions, disclosing conflicts of interest, maintaining independence and objectivity, and protecting the confidentiality of client information.
How to answer questions on Code of Ethics and Standards of Professional Conduct in an exam:
1. Read the question carefully and identify the ethical issue or standard being addressed.
2. Consider the relevant principles and standards from the Code and Standards.
3. Analyze the situation and determine the most appropriate course of action that aligns with the Code and Standards.
4. Select the answer choice that best reflects the ethical decision or action.
Exam Tips: Answering Questions on Code of Ethics and Standards of Professional Conduct
- Focus on the key ethical principles and standards relevant to the question.
- Apply the Code and Standards to the specific situation presented in the question.
- Choose the answer that best demonstrates adherence to the Code and Standards, even if it may not be the most favorable outcome for the investment professional.
- Be aware of common pitfalls, such as prioritizing personal gain over client interests or failing to disclose conflicts of interest.
- Practice applying the Code and Standards to various scenarios to develop your ethical decision-making skills.
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Code of Ethics and Standards of Professional Conduct practice test
The Code of Ethics and Standards of Professional Conduct are fundamental pillars within the Chartered Financial Analyst (CFA) Level 2 curriculum, embodying the ethical principles and professional guidelines expected of CFA charterholders. The Code of Ethics mandates that members and candidates must act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, employers, and colleagues. This involves placing the integrity of the investment profession and the interests of clients above personal interestsAccompanying the Code of Ethics are the Standards of Professional Conduct, which provide more detailed rules governing specific aspects of professional behavior. These standards are categorized into seven main areas:1. **Professionalism**: Requires adherence to high ethical standards, understand and comply with applicable laws, and avoid actions that could discredit the profession2. **Integrity of Capital Markets**: Prohibits practices such as insider trading and ensures that all market participants have equal access to material information3. **Duties to Clients**: Emphasizes loyalty, prudence, and care in managing client assets, including the obligation to act in the best interest of clients4. **Duties to Employers**: Focuses on maintaining confidentiality, avoiding conflicts of interest, and performing job responsibilities with competence5. **Investment Analysis, Recommendations, and Actions**: Ensures that investment decisions are based on thorough and objective analysis, free from undue influence6. **Confidentiality**: Mandates the protection of confidential information obtained during professional engagements7. **Additional Standards**: Includes guidelines on responsibilities related to research, referrals, and communication with clientsThese ethical guidelines are reinforced through mechanisms such as the CFA Institute’s enforcement procedures, which hold members accountable for violations. By adhering to the Code and Standards, CFA professionals promote trust, uphold the reputation of the investment management industry, and ensure the protection of clients’ interests. Mastery of these ethical principles is not only crucial for passing the Level 2 exam but also for sustaining a successful and reputable career in finance.
Time: 5 minutes Questions: 5
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Chartered Financial Analyst Level 2 Preparation Package (2024)
- 1221 Superior-grade Chartered Financial Analyst Level 2 practice questions.
- Accelerated Mastery: Deep dive into critical topics to fast-track your mastery.
- Unlock Effortless CFA Level 2 preparation: 5 full exams.
- 100% Satisfaction Guaranteed: Full refund with no questions if unsatisfied.
- Bonus: If you upgrade now you get upgraded access to all courses
- Risk-Free Decision: Start with a 7-day free trial - get premium features at no cost!