You are reading the 2026 curriculum (exams up to November 2026). Sitting in February 2027 or later? Go to the 2027 Ethical and Professional Standards guide.

Learning Module 3 of Ethical and Professional Standards 15–20% of the exam

Guidance for Standards I–VII

23 lessons. About 128 minutes in cram mode, 630 minutes in full.

Start with lesson 1 Learn with Sensei Read the module summary

Lessons

1
Standard I(A): Knowledge of the Law
demonstrate 6 min cram, 30 min full
2
Standard I(B): Independence and Objectivity
demonstrate 6 min cram, 32 min full
3
Standard I(C): Misrepresentation
demonstrate 6 min cram, 30 min full
4
Standard I(D): Misconduct
demonstrate 4 min cram, 20 min full
5
Standard I(E): Competence
demonstrate 4 min cram, 20 min full
6
Standard II(A): Material Nonpublic Information
demonstrate 8 min cram, 40 min full
7
Standard II(B): Market Manipulation
demonstrate 6 min cram, 24 min full
8
Standard III(A): Loyalty, Prudence, and Care
demonstrate 8 min cram, 36 min full
9
Standard III(B): Fair Dealing
demonstrate 6 min cram, 32 min full
10
Standard III(C): Suitability
demonstrate 6 min cram, 32 min full
11
Standard III(D): Performance Presentation
demonstrate 6 min cram, 26 min full
12
Standard III(E): Preservation of Confidentiality
demonstrate 4 min cram, 24 min full
13
Standard IV(A): Loyalty (to employers)
demonstrate 8 min cram, 36 min full
14
Standard IV(B): Additional Compensation Arrangements
demonstrate 4 min cram, 20 min full
15
Standard IV(C): Responsibilities of Supervisors
demonstrate 6 min cram, 28 min full
16
Standard V(A): Diligence and Reasonable Basis
demonstrate 6 min cram, 30 min full
17
Standard V(B): Communication with Clients and Prospective Clients
demonstrate 6 min cram, 30 min full
18
Standard V(C): Record Retention
demonstrate 4 min cram, 18 min full
19
Standard VI(A): Avoid or Disclose Conflicts
demonstrate 6 min cram, 30 min full
20
Standard VI(B): Priority of Transactions
demonstrate 6 min cram, 28 min full
21
Standard VI(C): Referral Fees
demonstrate 4 min cram, 18 min full
22
Standard VII(A): Conduct as Participants in CFA Institute Programs
demonstrate 4 min cram, 22 min full
23
Standard VII(B): Reference to CFA Institute, the CFA Designation, and the CFA Program
demonstrate 4 min cram, 24 min full

What the exam expects you to do

Demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity.Standard I(A): Knowledge of the Law
Recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct.Standard I(A): Knowledge of the Law
Identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards.Standard I(A): Knowledge of the Law

Module summary

The whole module on one sheet, organised by lesson: what to memorize, how the ideas fit together, the formulas and the key terms. No paragraphs, just what you need to revise.

Hide what I know

How deeply to learn each part

Know the idea: Understand it in general. It frames other topics, but you will not calculate with it.
Use it: Understand it well enough to solve a question with it. Recognize when it applies.
Memorize: Learn it by heart. The exam will not give it to you.

Standard I(A): Knowledge of the Law

Known

MemorizeStandard I(A): what to do

Situation	Required action
Law and Code differ	Follow the stricter one
No law on the point	Follow the Code and Standards
Law stricter than the Code	Follow the law
Law weaker than the Code	Follow the Code
You know of a violation	Dissociate: do not take part or help; may mean resigning
Unsure what applies	Ask compliance or legal counsel
Reporting a violation to authorities	Encouraged, not required (unless the law requires it)

Memory hook The higher bar wins, and you walk away from wrongdoing: stricter rule, step away.

Know it cold Dissociate means: urge the firm to stop it, document what you found, stay out of it, and resign if you must. Reporting to CFA Institute or regulators is not required by the Standard.

Key terms

knowledge of the law Memorize
applicable law Use it
stricter law rule Memorize
participation in violations Memorize
dissociation Memorize
whistleblowing Know the idea
legal counsel Use it

Which rule do you follow?

Applicable law vs the Code and Standardscompare them issue by issue

Law is stricter Memorize follow the law
Code is stricter Memorize follow the Code and Standards
No law applies Memorize follow the Code and Standards

When you find a violation

Knowing participation or assistance is a breachso you separate yourself

Dissociate Memorize required
- Urge the firm to stop it supervisor, then compliance or legal
- Document the facts what, whom you told, when
- Stop working on it ask to be reassigned
- Resign last resort, if nothing else works
Report to authorities Use it encouraged, not required by the Standard

Standard I(B): Independence and Objectivity

Known

MemorizeStandard I(B): pressure points and the right response

Situation	Right response
Gift or entertainment	Token items only; customary business entertainment is fine if not meant to influence. Gift from a client: accept modest, disclose to employer
Issuer offers flights or hotel	Pay your own way: commercial transport and hotel
Investment banking colleagues want a positive view	Resist. Firewall, or put the company on a restricted list (factual information only)
Client or public company pressures the rating	Keep the rating unaffected by the pressure
Issuer-paid research	Acceptable only with full disclosure and a flat fee not tied to the conclusion
Manager selection or credit rating	Decide on merit; no hospitality that sways the decision

Memory hook Who gives, how much, and what they want next: a token from a client is fine, a free trip from an issuer is not.

Know it cold Recommended procedures: protect the integrity of opinions, restricted list, pay own travel, limit gifts, restrict initial public offering (IPO) and private placement investing, review procedures, independence policy, appoint a compliance officer.

Key terms

independence and objectivity Memorize
gifts and entertainment Memorize
issuer-paid research Memorize
travel funding Memorize
investment banking relationship Use it
buy-side pressure Use it
credit rating agency Use it
restricted list Memorize
quiet period Know the idea

Where pressure on independence comes from

Threats to independence and objectivityany gift, benefit or pressure that could sway judgment

Buy-side clients Use it ask for a more favorable view
Investment banking colleagues Memorize want a positive rating on a banking client
Public companies and issuers Memorize pressure, hospitality, paid trips
Credit rating agencies Use it the issuer pays for the rating
Issuer-paid research Memorize fee and disclosure rules
Manager selection and attribution Use it gifts and relationships must not decide

Recommended procedures for I(B)

Keeping judgment independentmembers and firms

Protect the integrity of opinions Memorize reports reflect the analyst's unbiased view
Create a restricted list Memorize factual information only on that company
Restrict special cost arrangements Memorize pay your own transport and hotel
Limit gifts Memorize token items, value limit set by the firm
Restrict investments Use it prior approval for IPOs; strict limits on private placements
Review procedures and independence policy Use it analysts do not report into conflicted departments
Appoint a compliance officer Use it senior oversight and reporting channels

Standard I(C): Misrepresentation

Known

MemorizeStandard I(C): what is and is not misrepresentation

Case	Verdict
False or misleading statement, written, oral, electronic or social media	Violation
Omitting a fact that makes the message misleading	Violation
Guaranteeing a risky investment's return	Violation
Accurately describing a product with a real guarantee (for example an insured deposit)	Fine
Copying or lightly rewording others' work, charts or forecasts without credit	Plagiarism: violation
Common data from recognized statistical sources (for example a published central bank rate)	Fine without citation
Using firm research or a departed colleague's model under the firm's name	Fine: work for employer
Reissuing a colleague's report solely under your own name	Violation
Unintentional error you correct promptly	Not a violation; stop distribution, correct it

Memory hook Would it mislead a reasonable reader? Lie, leave out, guarantee, or lift: all four are I(C).

Know it cold The Standard bites on knowing misstatements, but you should have known counts when a falsehood repeats in your own materials. Recommended: factual presentations, qualification summary, verify outside information, keep web pages current, plagiarism policy (keep copies, attribute quotes and summaries).

Key terms

misrepresentation Memorize
omission Memorize
guarantee of performance Memorize
plagiarism Memorize
attribution Use it
work completed for employer Memorize
qualification summary Use it
social media Know the idea

What counts under I(C)

Misrepresentationany knowing false or misleading message

False or misleading statements Memorize any form, including social media
- About analysis and recommendations certainty that is not there
- About qualifications and services experience, degrees, services no longer offered
Omissions Memorize leaving out a fact that misleads
Performance reporting Use it comparable benchmark, consistent pricing, no cherry-picking
Guarantees Memorize banned on uncertain returns; real guarantees may be described accurately
Plagiarism Memorize presenting others' work as your own
- Copied or lightly reworded text credit it
- Unsourced charts, forecasts, quotes name the source
- Others' spreadsheets or models get permission
- Allowed without credit common data, and the firm's own work

Standard I(D): Misconduct

Known

MemorizeStandard I(D): the test

Question	If yes
Is it dishonest, fraudulent or deceitful, in or out of work?	Misconduct
Does it damage your professional integrity, reputation or competence (for example working impaired)?	Misconduct
Is it purely private conduct with neither?	Generally not covered

Memory hook Dishonesty anywhere counts; private life otherwise does not.

Know it cold Firm procedures: a code of ethics, a list of violations and sanctions, and reference checks on new hires.

Key terms

misconduct Memorize
dishonesty, fraud and deceit Memorize
professional reputation Use it
personal behavior Use it

Is it misconduct under I(D)?

Conduct or actprofessional or personal

Covered by I(D) Memorize misconduct
- Dishonesty, fraud or deceit at work, or in personal dealings
- Acts that damage integrity or competence for example working while impaired
Generally not covered Memorize private life
- Peaceful civil disobedience not dishonest
- Personal bankruptcy unless it involved fraud or deceit

Standard I(E): Competence

Known

MemorizeStandard I(E): what it requires and what it does not

Point	Rule
Duty	Act with and maintain the competence your responsibilities require
Made of	Knowledge (what you know), skills (what you can do), abilities (capabilities and attitudes behind results)
Depends on	The role; changes when the role changes
A loss or wrong forecast	Not proof of incompetence
Education alone	Not enough: a specialist may be out of depth in a new area
Training program	None mandated; you choose how
Status	New in the 2023 revision

Memory hook K-S-A: Know it, Show it, Act on it. Competence is the job you do now, kept current.

Know it cold Recommended: ongoing professional development, studying for or earning certifications, conferences and webinars, employer training, self-study, expert groups, and becoming proficient when responsibilities change.

Key terms

competence Memorize
knowledge, skills and abilities Memorize
maintaining competence Memorize
continuing education Use it
professional development Use it

What competence is and how to keep it

Competence for your roleact with it and maintain it

Knowledge, skills and abilities Memorize what the role needs
- Knowledge information applied to the function
- Skills capability to perform role-specific tasks
- Abilities capabilities and attitudes behind observable results
Ways to maintain it Memorize none is mandated
- Professional development or continuing education regular
- Certifications and designations studying for or earning them
- Conferences, seminars, webinars attending
- Employer training taking part regularly
- Self-study and expert groups reading, joining organizations
- New skills when the role changes become proficient first

Standard II(A): Material Nonpublic Information

Known

MemorizeStandard II(A): the two gates

Gate	Information passes if	Pushes it through
Material	It would affect the price, or a reasonable investor would want it	Specific, reliable source, clear price effect
Nonpublic	It has not been made available to the market in general	Told to a few analysts or a closed group: still nonpublic

Memory hook Two gates, both must be open. Material AND nonpublic: freeze. Either one closed: the Standard does not bite.

Know it cold Both gates open: do not act, do not cause others to act (no trading, no tipping, no hinting through changed recommendations).

MemorizeIf you receive it

Step	Action
1	Do not trade and do not alter recommendations
2	Encourage the issuer to make it public
3	If it cannot be made public, tell only supervisory and compliance staff

Memory hook Freeze, push it public, tell compliance. Never "publish it yourself" or "tell big clients".

Know it cold Firewall: compliance clearance of cross-department talk, watch / restricted / rumor lists, documentation, heightened proprietary-trading review; plus physical separation and no personnel overlap.

Key terms

material nonpublic information Memorize
materiality Memorize
public dissemination Memorize
mosaic theory Memorize
industry experts and expert networks Use it
firewall Memorize
watch list and restricted list Memorize
insider trading Know the idea

Is the information covered by II(A)?

Information you holdabout an investment

Material and nonpublic Memorize both gates open
- Do not act or cause others to act no trades, no tips
- Encourage public disclosure then tell compliance if it cannot be made public
Material but public Memorize already disseminated
- Free to use II(A) no longer applies
Nonpublic but not material Memorize small details
- Mosaic theory may be combined with public facts into a conclusion

What a firewall contains

Firewallthe main control against misuse of inside information

Compliance clearance Memorize cross-department communication goes through compliance or legal
Lists Memorize watch, restricted and rumor lists to review employee trading
Physical separation Memorize banking away from sales and research
No personnel overlap Memorize an employee is on one side of the wall at a time
Documentation and proprietary trading review Use it record the controls; restrict firm trading while holding inside information

Standard II(B): Market Manipulation

Known

MemorizeStandard II(B): two types and one test

Type	What it is	Examples
Information-based	Spreading false or misleading information to induce trading	False rumors; pump and dump; exaggerated projections
Transaction-based	Trades that give a false impression of activity, price or liquidity, or a dominant position used to force prices	Wash trades, matched orders; squeeze of a derivative or its underlying asset
Legitimate	Trades on a genuine view, tax or arbitrage purposes	Not manipulation even if the price moves

Memory hook Talk it up or trade it up: information or transactions. The test is the same for both: was it meant to mislead?

Know it cold Violation needs intent to mislead (or knowing the trades would distort). A price move alone is never enough.

Key terms

market manipulation Memorize
information-based manipulation Memorize
transaction-based manipulation Memorize
pump and dump Memorize
wash trading Use it
market squeeze Use it
intent to mislead Memorize

Is it market manipulation?

Conduct that moves price or volumethen ask about intent

Information-based manipulation Memorize misleading statements
- False rumors to induce trading by others
- Pump and dump talk up what you hold, then sell into the rise
Transaction-based manipulation Memorize misleading trades
- False activity or price wash trades, matched orders
- Dominant position squeeze a derivative or the underlying asset
Legitimate strategy Memorize no intent to mislead
- Trades on a genuine view valuation, tax, arbitrage

Standard III(A): Loyalty, Prudence, and Care

Known

MemorizeStandard III(A): what to know cold

Topic	The rule
Loyalty	Client interests before your employer's and your own
Prudence and care	The judgment and care a reasonable professional would use in managing and disposing of their own affairs
The client	Individual: the person. Pension plan or trust: the beneficiaries, not the sponsor or trustee. Fund run to a mandate: the mandate
Soft commissions	Client brokerage is the client's asset. Using it (or paying more) for goods or services that do not benefit the client is a violation
Directed brokerage	The client may direct it. Still seek best execution and disclose that the client may not be getting it
Proxies	Vote in an informed, responsible way. Skipping is fine if a cost-benefit analysis says voting will not help the client. Disclose the policy
Statements	At least quarterly; separate client assets from your own

Memory hook Whose money is it? Commissions, votes and portfolio decisions all belong to the client, so spend them only on the client.

Know it cold Find the real client first. Then ask whether each action helps that client, not the firm or you.

Key terms

duty of loyalty Memorize
prudence Memorize
care Use it
fiduciary duty Know the idea
identifying the client Memorize
client brokerage Memorize
soft commissions Memorize
directed brokerage Use it
best execution Memorize
proxy voting Use it

Who is the client?

Duty of loyalty, prudence and careowed to the real client

Individual account Memorize the person who owns the assets
Pension plan or trust Memorize not the party who hired you
- Beneficiaries owed the duty of loyalty
- Sponsor or trustee hires you but is not the client
Fund managed to a mandate Use it no single client profile
- The stated mandate invest consistently with it
- Adviser to the fund's investors carries the personal client duties

Standard III(B): Fair Dealing

Known

MemorizeStandard III(B): what to know cold

Topic	The rule
Fair, not equal	No discrimination. Clients cannot all be reached at the same instant
Recommendations	Give all clients a fair opportunity to act. Changes matter more than first calls. Warn clients who have acted on the old view
Oversubscribed issue	Pro rata on order size, same price, round lots. Do not buy for yourself or relatives unless their accounts are managed like clients'
Hot issues	Bona fide public distribution. Never held back or used as a reward
Levels of service	Allowed if disclosed, open to all who pay, and not disadvantaging others
Client consent	Cannot excuse a patently unfair allocation method

Memory hook Same chance, same price, not same size: fill ratio = shares received ÷ total ordered, applied to every order.

Know it cold Allocate pro rata, disseminate together, disclose the procedures.

Key terms

fair dealing Memorize
investment recommendation Use it
investment action Use it
oversubscribed issue Memorize
pro rata Memorize
hot issue Use it
block trade Use it
levels of service Memorize

Where Standard III(B) applies

Fair dealingfair, not equal

Investment recommendations Memorize opinions on buying, selling or holding
- Initial and changed recommendations a fair chance for all to act
- Reach clients who acted on the old view and warn anyone ordering against the new one
Investment action Memorize trades and allocations
- Block trades same price, same commission, pro rata fills
- Oversubscribed new issues pro rata, round lots
Levels of service Memorize allowed with conditions
- Disclosed to clients and prospects
- Open to all not offered selectively

Formulas

Pro rata allocation Use it

A = O \times \frac{S}{T}

Quick example

A firm receives 7,000 shares of an oversubscribed issue. Eligible clients ordered 10,000 shares in total, and one client ordered 5,000. Fill ratio 7,000 ÷ 10,000 = 70%, so that client receives 5,000 × 0.70 = 3,500 shares.

On your calculator

7000÷10000×5000= 3500

7000ENTER10000÷5000× 3500

ENTER enter (on the HP, puts the number on the stack)

Standard III(C): Suitability

Known

MemorizeStandard III(C): what to know cold

Situation	What you must do
Advisory relationship	Reasonable inquiry into experience, risk and return objectives and constraints before advising or acting. Put it in a written IPS
Updating	IPS reviewed at least annually and before material changes to recommendations or decisions
Judging fit	Each investment against the client's needs, the investment's characteristics and the total portfolio, not alone
Unsolicited, unsuitable, small impact	Discuss, educate. Client acknowledges. Follow firm policy, then you may proceed
Unsolicited, unsuitable, material impact	Use it to update the IPS. If the client refuses: separate account if the firm allows, else decide whether to continue the relationship
Fund run to a mandate	Stay inside the stated objectives and constraints. Suitability for each investor is the adviser's job

Memory hook Know, fit, update: know the client, fit the whole portfolio, update every year.

Know it cold Advisory duty runs to the client's IPS. Mandate duty runs to the fund's stated mandate.

Key terms

suitability Memorize
advisory relationship Memorize
investment policy statement Memorize
risk profile Use it
total portfolio context Memorize
unsolicited trade request Memorize
managing to a mandate Memorize

A client asks for a trade the adviser thinks is unsuitable

Unsolicited, unsuitable requestpause and discuss before trading

Small impact on the portfolio Memorize size or risk change is limited
- Educate the client show how it departs from the IPS
- Client acknowledges the discussion then follow firm policy and proceed
Material impact Memorize portfolio risk or return shifts
- Update the IPS the client sees the effect on goals
- Client refuses to update options depend on the firm
  - Separate accountif firm policy allows
  - Reconsider the relationshipif no alternative exists

Standard III(D): Performance Presentation

Known

MemorizeStandard III(D): what to know cold

Topic	The rule
Test	Reasonable efforts to make performance fair, accurate and complete
Scope	Past performance and reasonably expected performance. Whole firm, one member, written or oral
Do not	Cherry-pick accounts or periods; drop terminated accounts; imply past returns will repeat
Must label	Simulated or model results; a prior firm's record; gross, net or after-tax basis
Brief presentation	Allowed. Supporting detail must be available on request. Best practice notes that it is limited
Best method	Comply with the GIPS standards. Otherwise use composites of similar portfolios and keep records

Memory hook Whole record, honest label: every account, every period, and a tag on anything that is not real, gross or borrowed.

Know it cold Ask three questions of any figure: is it fair, is it accurate, is it complete?

Key terms

fair, accurate and complete Memorize
composite Use it
terminated accounts Memorize
simulated results Memorize
prior-firm record Use it
brief presentation Use it
GIPS standards Know the idea

What a performance figure must be, and how to keep it so

Performance communicationfair, accurate and complete

Avoid Memorize practices that mislead
- Cherry-picking best accounts or best periods only
- Dropping terminated accounts survivors-only record
- Unlabeled simulations model results shown as actual
Disclose Memorize so the audience is not misled
- Simulated or model results say so
- A prior entity's record where and how it was earned
- Gross, net or after-tax which basis applies
Method Use it recommended procedures
- GIPS compliance the best method
- Weighted composites of similar portfolios, not one star account
- Keep supporting records the data behind each figure

Standard III(E): Preservation of Confidentiality

Known

MemorizeStandard III(E): what to know cold

Topic	The rule
Who is covered	Current, former and prospective clients
Exception 1	The information concerns illegal activity by the client
Exception 2	Disclosure is required by law
Exception 3	The client or prospect permits it
CFA Institute PCP	Providing client information for an investigation into your own conduct is not a breach
Safest practice	Share only with colleagues who also work for the client. If in doubt, ask compliance or legal counsel

Memory hook Three gates, and they are all open or shut for a reason: crime, court, consent. No gate, no sharing.

Know it cold Does an exception apply? If none does, keep it confidential, whatever the client's status.

Key terms

client confidentiality Memorize
former and prospective clients Memorize
illegal activity exception Memorize
disclosure required by law Memorize
client permission Memorize
Professional Conduct Program investigation Use it
information security Use it

May client information be disclosed?

Information about a clientdefault: keep it confidential

Who is covered Memorize status does not matter
- Current clients
- Former clients the duty survives the relationship
- Prospective clients including those who never signed
Three exceptions Memorize any one is enough
- Illegal activity by the client may need to report to the authorities
- Required by law for example a court order
- Client or prospect permits it express authorization
Not a breach Use it PCP investigations
- CFA Institute Professional Conduct Program treat it as an extension of yourself

Standard IV(A): Loyalty (to employers)

Known

MemorizeStandard IV(A): what to know cold

Situation	The rule
Duty	In job-related matters, act for the employer's benefit; never harm it. Clients and market integrity still come first
Independent practice	Competing paid work: notify the employer, describe the services, compensation and duration, get consent before starting
Before leaving	Prepare on your own time and resources. No soliciting clients or prospects, no taking or copying records, models or client lists
After leaving	Contact former clients from public sources or memory. Skills and experience are yours. Check any non-compete
Whistleblowing	Acting against the employer to protect clients or market integrity (not for personal gain) is not disloyal
Contractors	Covered too. The degree of control decides employee or contractor
Social media	Follow firm policy. Firm-approved business accounts belong to the firm

Memory hook Prepare on your own time; solicit and take nothing until you are gone. Memory and public sources travel with you, files do not.

Know it cold Planning is allowed. Soliciting, copying and competing for pay without consent are not.

Key terms

duty of loyalty to the employer Memorize
independent practice Memorize
leaving an employer Memorize
solicitation Memorize
client records Memorize
non-compete agreement Use it
whistleblowing Memorize
nature of employment Use it
social media accounts Use it

Standard IV(A): what loyalty allows

Duty of loyalty to the employerjob-related matters; clients and markets rank higher

While still employed Memorize act in the employer's interest
- Allowed register a firm, rent an office, plan, on your own time and resources
- Not allowed solicit clients or prospects, copy lists, files or models, misuse confidential information
Competing paid work on the side Memorize independent practice
- Notify the employer first describe the services, compensation and duration
- Start only after consent
After you have left Memorize the knowledge is yours, the records are not
- Allowed public sources, memory, skills and experience
- Not allowed the firm's records, or anything a valid non-compete bars
Never a breach
- Whistleblowing aimed at protecting clients or markets

Standard IV(B): Additional Compensation Arrangements

Known

MemorizeStandard IV(B): what to know cold

Point	The rule
Trigger	Pay or benefits that compete with the employer or could reasonably create a conflict
Consent	Written, from all parties involved, before accepting
Written means	Any documented form, including a retrievable email. Verbal is not enough
Report contents	The nature, approximate amount and duration, confirmed by the party offering it
Report to	The supervisor and compliance officer, immediately
Not this Standard	Whether a gift threatens independence: that is I(B). Disclosing conflicts: VI(A)

Memory hook If it could pull your loyalty, get it in writing first: what, how much, how long.

Know it cold Competing or conflicting benefit + no written prior consent = violation. Verbal or after-the-fact consent does not count.

Key terms

additional compensation Memorize
written consent Memorize
all parties involved Memorize
client bonus Use it
outside directorship Use it

Standard IV(B): what to do before accepting

Extra pay or benefit from someone other than your employercash, trips, directorships, fees

Does it compete or risk a conflict? Memorize if not, IV(B) is not triggered
- Client bonus tied to performance
- Paid directorship or consulting fee
- Payments from a broker or supplier
Written consent first Memorize
- All parties involved in practice the employer, with the payer's terms confirmed
- Written, including email verbal is not enough
- Before accepting never afterward
What the written report states Use it
- Nature of the compensation
- Approximate amount
- Duration of the arrangement

Standard IV(C): Responsibilities of Supervisors

Known

MemorizeStandard IV(C): what to know cold

Point	The rule
Who is a supervisor	Anyone with employees under their control or influence, members or not
Duty	Reasonable efforts to prevent and detect violations through an effective compliance system
On a suspected violation	Act promptly, investigate the scope, restrict or monitor the employee meanwhile, review procedures
Not enough	A warning, the employee's assurances, or only reporting up the chain
Inadequate system	Tell senior management, recommend fixes, and decline supervision in writing until procedures are adopted
Liability	Not for every violation: a reasonable system that a determined employee evades is not the supervisor's breach

Memory hook Prevent, detect, respond: a system before the problem, then investigate and restrict the moment something looks wrong.

Know it cold Reasonable efforts judged by the system and the response. A reminder is never a response.

Key terms

supervisor Memorize
reasonable efforts Memorize
compliance system Memorize
detection Memorize
adequate compliance procedures Memorize
declining supervisory responsibility Memorize
compliance training Use it

Standard IV(C): a supervisor's duties

Reasonable efforts to prevent and detect violationsby everyone under your supervision or authority

Build the system Memorize before any violation
- Adequate compliance procedures written, tailored, easy to follow
- Designated compliance officer clear authority and resources
- Training and incentives reward ethical behavior
Detect Memorize
- Monitor and review check procedures are followed
Respond to a violation Memorize
- Respond promptly and investigate do not rely on assurances
- Restrict or monitor the employee pending the outcome
- Review procedures prevent a repeat
System inadequate Memorize you cannot supervise
- Tell senior management and recommend fixes
- Decline supervision in writing until reasonable procedures are adopted

Standard V(A): Diligence and Reasonable Basis

Known

MemorizeStandard V(A): what to know cold

Situation	What you must do
Your own recommendation	Exercise diligence, independence and thoroughness; have a reasonable and adequate basis backed by research
Secondary (same firm) or third-party (outside firm) research	Make reasonable efforts to confirm it is sound. Check assumptions, rigor, timeliness, objectivity and independence
Quantitative model	Understand its assumptions and limitations; test it before use, including extreme scenarios
External adviser / subadviser	Review as carefully as a security: code of ethics, compliance and controls, return data quality, process and adherence to strategy
Group report you disagree with	Stay on it if the consensus has a reasonable basis and is independent and objective. You may document your dissent
Outcome	A bad result after a diligent process is not a violation

Memory hook Trust, then verify: who wrote it, what did they assume, how hard did they look, is it current, are they independent?

Know it cold No reasonable basis (thin sources, unchecked research, untested model) = violation. A sound process that still loses money = no violation.

Key terms

diligence Memorize
reasonable basis Memorize
third-party research Memorize
quantitative models Use it
external advisers Use it
group research Use it
dissenting opinion Use it

Standard V(A): where a basis comes from and what to check

Reasonable and adequate basisthe evidence behind a recommendation or action

Your own research Use it filings, management calls, industry and macro context
Others' research Memorize
- Secondary research done by someone else in your firm
- Third-party research done outside the firm, such as a broker
- Check assumptions, rigor, timeliness, objectivity and independence
Quantitative models Use it
- Understand assumptions and limitations
- Test before use including extreme scenarios
- Developers owe a higher level of diligence than users
External advisers Use it
- Code of ethics
- Compliance and internal controls
- Quality of reported returns
- Process and adherence to strategy

Standard V(B): Communication with Clients and Prospective Clients

Known

MemorizeStandard V(B): the five duties

#	Duty	Key detail
1	Services and costs	What you will do (and not do) and the costs the client pays, including affiliates and third parties. No dollar amounts or firm costs needed
2	Investment process	Basic format and general principles; promptly disclose changes that might materially affect it
3	Risks and limitations	Significant ones known at the time, such as leverage, liquidity, capacity
4	Important factors	Use reasonable judgment; include what matters so readers can follow and challenge the reasoning
5	Fact vs opinion	Label forecasts and estimates as opinion; state model limits

Memory hook S-P-R-F-F: Services and costs, Process, Risks, Factors, Fact vs opinion. Say what you do, how you do it, what could go wrong, what matters, and what is only a view.

Know it cold Applies to every form of communication, written or spoken. Disclosure is ongoing. A short post is fine if fuller information is available.

Key terms

nature of services and costs Memorize
investment process disclosure Memorize
material changes Memorize
risks and limitations Memorize
fact versus opinion Memorize
forms of communication Use it
report presentation Use it

Standard V(B): what to tell clients

Communication with clients and prospectsany form: report, call, email, social media

Services and costs Memorize what you provide and what the client pays
- Nature of services including what is not provided
- Costs to the client including affiliates and third parties; no dollar figure needed
Investment process Memorize
- Basic format and general principles
- Material changes disclosed promptly
Risks and limitations Memorize
- Significant risks leverage, counterparty, country, credit
- Limitations liquidity and capacity
Report content Use it
- Important factors by reasonable judgment
- Fact vs opinion forecasts labeled as opinion

Standard V(C): Record Retention

Known

MemorizeStandard V(C): what to know cold

Point	The rule
What	Records that support analysis, recommendations, actions and client communications, including reviews that led to no change
Which media	Any: paper, electronic, emails, texts, blog and social media posts
Who owns them	The firm. Leaving? No copies without express consent. Rebuild from public sources, not from memory
How long	Local rules or firm policy first. If none, at least seven years
Who keeps them	Usually the firm, but you must archive your own notes and documents supporting current communications

Memory hook Keep it, it is theirs, seven years: keep what supports the work, the firm owns it, and seven years is the fallback when no rule applies.

Know it cold Law or firm policy beats the guideline. No rule = at least seven years. Records leave with the firm, never with you.

Key terms

record retention Memorize
records are the property of the firm Memorize
new media records Use it
local requirements Memorize
seven-year guideline Memorize

Standard V(C): what to keep, who owns it, how long

Records supporting your workanalysis, recommendations, actions, client communications

Keep Memorize
- Research notes and models inputs and outputs
- Meeting notes and outside research
- Client communications email, texts, social media
- Reviews with no change in position
Ownership Memorize
- Property of the firm not the individual
- Leaving no copies without express consent; rebuild from public sources
Duration Memorize
- Local law or firm policy follow first
- No rule at least seven years

Standard VI(A): Avoid or Disclose Conflicts

Known

MemorizeStandard VI(A): what to know cold

Point	The rule
Trigger	Anything that could reasonably be expected to impair independence and objectivity or interfere with duties to clients, prospects and the employer
Step 1	Avoid actual or apparent conflicts where reasonably possible
Step 2	If not reasonable, disclose fully and fairly
Good disclosure	Prominent, in plain language, effective at getting the message across
Who	Clients, prospects and the employer, as relevant
Update	When the conflict changes materially; err on the side of caution
Classic sources	Pay structures, stock you own, board seats, cross-departmental ties

Memory hook Avoid it, or make it impossible to miss: if the reader needs a magnifying glass, it is not disclosed.

Know it cold Avoidable conflict left in place, or disclosure that is buried or jargon-filled = violation. Since 2023 the title is "Avoid or Disclose", not just "Disclosure".

Key terms

conflict of interest Memorize
avoid or disclose Memorize
prominent plain-language disclosure Memorize
cross-departmental conflicts Use it
stock ownership conflicts Use it
board membership Use it
compensation structures Use it

Standard VI(A): the conflict ladder

A matter that could impair independence or objectivityactual or apparent

Rung 1: avoid Memorize preferred; where reasonably possible
- Sell or do not take the holding
- Decline the outside role or extra pay
Rung 2: disclose Memorize when avoiding is not reasonable
- Prominent not in a footnote
- Plain language no jargon or legalese
- Effective the reader understands it
Who must be told Use it
- Clients and prospects
- The employer promptly, with enough detail to assess it

Common sources of conflict

Where conflicts come from

Compensation structures Use it bonuses tied to short-term results or banking revenue
Stock ownership Use it beneficial ownership of securities you recommend
Board membership Use it duties to shareholders, MNPI, option grants
Cross-departmental ties Use it research, banking, sales and marketing pressure
Issuer relationships Use it directorship, consultancy, underwriting, market making

Standard VI(B): Priority of Transactions

Known

MemorizeStandard VI(B): what to know cold

Point	The rule
Order	Clients, then employer, then you (any account with beneficial ownership)
Personal trading is allowed if	client not disadvantaged; you do not benefit from client trades; you follow regulation
Forbidden	Front running; trading on pending client orders, recommendation changes or research
Beneficial ownership	Own, family, and accounts with a pecuniary interest (trust, retirement)
Family client accounts	Treat like any client: no favor, no disadvantage
Procedures	IPO limits, private placement limits, blackout periods, reporting
Reporting	Holdings at hire and at least annually; duplicate confirmations; preclearance

Memory hook Clients, firm, me: the same order as a queue at a counter. Jumping the queue is front running.

Know it cold Personal trade ahead of a related client trade = violation. A fee-paying relative gets no special treatment and no penalty.

Key terms

priority of transactions Memorize
beneficial ownership Memorize
front running Memorize
blackout period Use it
restricted period Use it
preclearance Memorize
IPO participation Use it
private placements Use it
family accounts Memorize

Standard VI(B): who trades first

Order of transactions

1. Clients Memorize always first
2. Employer Memorize firm accounts
3. Personal Memorize accounts where you are a beneficial owner
- Your own account
- Family accounts unless a genuine fee-paying client account
- Accounts with a pecuniary interest trust, retirement

Recommended personal-trading procedures

Firm policy on personal investingdisclosed to clients and prospects

Limit IPO participation Memorize and preclear any
Restrict private placements Memorize strict limits, supervisory review
Blackout or restricted periods Memorize around client trades
Reporting requirements Memorize
- Holdings disclosure at hire and at least annually
- Duplicate confirmations and periodic statements
- Preclearance of planned personal trades

Standard VI(C): Referral Fees

Known

MemorizeStandard VI(C): what to know cold

Point	The rule
What	Any compensation, consideration or benefit: cash, soft dollars or in kind
Direction	Received or paid
Tell	Employer, clients and prospects, as appropriate
When	Before any formal agreement for services
Content	The nature (flat or percentage, one-time or continuing, performance-based, noncash) and the estimated dollar value
Inside the firm	Inter-departmental referral pay counts too
Employer updates	At least quarterly on the amount and nature received

Memory hook Any benefit, either way, before the signature: what it is and what it is worth.

Know it cold Referral benefit not disclosed, or disclosed after the client signs = violation. Non-cash and reciprocal referrals are not exempt.

Key terms

referral fees Memorize
disclosure before engagement Memorize
nature and value of consideration Memorize
inter-departmental referrals Use it

Standard VI(C): the disclosure checklist

Benefit given or received for a recommendationcash, soft dollars or in kind

To whom Memorize
- Employer
- Clients and prospects as appropriate
When Memorize
- Before any formal agreement never after signing
What to say Memorize
- Nature of the consideration flat fee or percentage, one-time or continuing, performance-based, noncash
- Estimated dollar value

Standard VII(A): Conduct as Participants in CFA Institute Programs

Known

MemorizeStandard VII(A): what you may and may not say

Violation	Fine
Specific questions or formulas from the exam	Published curriculum and nonconfidential material
Broad topics tested or not tested	Opinions: "it was hard", "time was tight"
Cheating, helping others, ignoring testing rules	Criticizing CFA Institute, its policies or its exam format
Misstating facts on the Professional Conduct Statement	Studying with others from nonconfidential material

Memory hook Talk about how it felt, never about what was on it.

Know it cold Covers all CFA Institute programs, not only the CFA exams, and members who volunteer (setting or grading exams) must keep that work confidential.

Key terms

conduct in CFA Institute programs Memorize
confidential program information Memorize
exam security Use it
Professional Conduct Statement Use it
expressing opinions about CFA Institute Memorize

What VII(A) covers

Conduct in CFA Institute programsexams, grading, forms

Prohibited Memorize compromises integrity, validity or security
- Cheating or helping others including breaking testing rules
- Disclosing confidential program information questions, formulas, topics tested or not
- Misstating facts on program forms for example the Professional Conduct Statement
- Volunteer breaches revealing exam development or grading material
Permitted Memorize not covered
- Expressing opinions about CFA Institute policies, procedures, advocacy positions
- Discussing nonconfidential curriculum study groups, published information

Standard VII(B): Reference to CFA Institute, the CFA Designation, and the CFA Program

Known

MemorizeStandard VII(B): proper vs improper

Proper	Improper
"Ana Ruiz, CFA charterholder"	"Ana Ruiz is a CFA" (noun)
"Passed Level I of the CFA Program in 2025"	"CFA, Level II" (partial designation)
"Level III candidate in the CFA Program" (enrolled for the next exam)	"CFA, expected 2027" or "charter pending"
"Passed all three levels in three consecutive years" (fact)	"Three levels in three years proves I am a cut above"
"The program is rigorous and demanding"	"Charterholders outperform other managers" or "I will beat the market"

Memory hook Adjective only, no levels, no promises. Facts yes, boasts no.

Know it cold Keep dues paid and the Professional Conduct Statement filed yearly. If either lapses you are not an active member or charterholder until reactivated (you may say you were one).

MemorizeWho is a candidate

You are a candidate if	You are not if
Registration accepted and enrolled to sit a specified exam	Registered but not enrolled for any exam
You have sat an exam and results are not yet received	Enrollment lapses, until you enroll again

Memory hook No exam booked, no candidacy.

Know it cold Candidates never state or imply a partial designation or an expected completion date.

Key terms

CFA designation Memorize
CFA charterholder Memorize
CFA Program candidate Memorize
active membership Use it
proper and improper references Memorize
partial designation Memorize
superior performance claims Memorize

Referring to CFA Institute, the designation and the program

VII(B) referencesany medium: cards, bios, websites, speech

CFA Institute member Memorize active only
- Dues paid yearly to stay active
- Professional Conduct Statement filed yearly renews the commitment to the Code
CFA charterholder Memorize may use the designation
- Completed the program and work experience right to use earned
- Membership requirements kept lapse forfeits the right until reactivated
Candidate in the CFA Program Memorize registered and enrolled, or awaiting results
- No partial designation never "CFA Level II"
- No expected date never "CFA, expected 2027"

Cheat sheet · PDF · 13 A4 pages

Guidance for Standards I–VII on 13 pages

What to memorize, the concept maps, every formula with a worked example and keystrokes for the TI BA II Plus and HP 12C, how each idea is asked, and the traps. Print it, or keep it on your phone.

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