CFA Level I Ethical and Professional Standards formulas
Ethics is judgment, not math. The only formulas are the pro rata rules for sharing out a partly filled block trade fairly across clients.
2 formulas from the Ethical and Professional Standards lessons (10–15% of the exam), 0 to memorize. Each says how deeply to learn it and opens to a quick worked example with the keystrokes for the TI BA II Plus and the HP 12C.
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.
Module 5 Guidance for Standard III: Duties to Clients
Standard III(B): Fair Dealing
Quick example
A firm receives 6,400 shares of an oversubscribed issue. Eligible clients ordered 10,000 shares in total, and one client ordered 4,000. Fill ratio 6,400 ÷ 10,000 = 64%, so that client receives 4,000 × 0.64 = 2,560 shares.
- 6400÷10000×4000= 2560
- 6400ENTER10000÷4000× 2560
ENTER enter (on the HP, puts the number on the stack)
Module 10 Ethics Application
Cases on market integrity and duties to clients
Quick example
A manager receives 9,000 bonds. Eligible orders total 25,000. Fill rate 9,000 ÷ 25,000 = 36%. A client who ordered 5,000 receives 0.36 × 5,000 = 1,800.
- 9000÷25000×5000= 1800
- 9000ENTER25000÷5000× 1800
ENTER enter (on the HP, puts the number on the stack)
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