How the Code and Standards are enforced: the Professional Conduct Program
CFA Institute's Professional Conduct Program enforces the Code and Standards under the oversight of the Board of Governors, with volunteer charterholders on the Disciplinary Review Committee. Staff investigate; the member or candidate may accept or reject the proposed sanction; a DRC panel decides contested cases. Sanctions range from censure to revocation.
Before this: Ethics and Trust in the Investment Profession
On the exam
- Describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards
Describe the structure of the Professional Conduct Program and the enforcement process. Expect "which of these is a source of inquiry?", "which sanction can CFA Institute impose?" or "what happens if the member rejects the sanction?".
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.
You know this one. The full lesson is folded away. The takeaways, formulas and checkpoint below are your quick refresher, and the checkpoint is a fair test of whether you still do.
You tested strong here. The full lesson is folded away. The takeaways, formulas and checkpoint below are your quick refresher, and the checkpoint is a fair test of whether you still know it.
Who enforces the Code and Standards?
Every CFA Institute member and every candidate enrolled in the CFA Program must follow the Code and Standards. Enforcement belongs to CFA Institute itself, not to a regulator. The Board of Governors keeps oversight and ultimate responsibility for the Professional Conduct Program (PCP). The PCP works with the Disciplinary Review Committee (DRC), a volunteer committee of charterholders who sit on hearing panels and help staff set conduct policy.
- Board of Governors Know the idea oversight and ultimate responsibility
- Professional Conduct Program (PCP) Memorize staff who investigate and propose outcomes
- Disciplinary Review Committee (DRC) Memorize volunteer charterholders; hearing panels; help set conduct policy
The structure rests on CFA Institute’s bylaws and the Rules of Procedure for Professional Conduct . The process covers testing policies as well as the Code and Standards, which is why exam conduct (a candidate sharing exam content online, for example) goes through it. The same division also enforces the testing policies of other CFA Institute education programs and the conduct of Certificate in Investment Performance Measurement (CIPM) certificants.
Know the idea
How does an inquiry start?
An inquiry opens from one of five sources. Learn them as a list, because “which of these is a source?” is the usual question.
- Self-disclosure. Each year members and candidates complete the Professional Conduct Statement and must report anything that questions their conduct, such as civil litigation, a criminal investigation or a written complaint against them.
- A written complaint received by Professional Conduct staff.
- Public information, such as media coverage or a regulatory notice.
- A proctor’s report on a candidate suspected of breaking the testing rules on exam day.
- Post-exam analysis of scores and exam materials, plus monitoring of social media for leaked exam content.
Memorize
Try this 0 of 3
- End a matter with a cautionary letter
- Find the only route to a DRC hearing panel
- Follow the sample case to the end
Step 1 of 5
An inquiry starts
Professional Conduct staff open an inquiry when a matter reaches them from one of five sources.
- Self-disclosure: the annual Professional Conduct Statement, for example civil litigation, a criminal investigation or a written complaint about you.
- Written complaints: sent to Professional Conduct staff.
- Public sources: the media, regulatory notices and other public information.
- Exam proctors: reports on candidates suspected of breaking testing rules on exam day.
- Post-exam analysis: reviews of scores and exam materials, and monitoring of online and social media.
Path so far: Inquiry → Investigation → …
Who is involved: the Board of Governors oversees the program; Professional Conduct staff investigate and propose outcomes; the Disciplinary Review Committee supplies the hearing panels. Firms and non-members cannot be sanctioned, but may adopt the Code and Standards and claim compliance.
What happens once an inquiry is open?
Staff investigate. They may ask the member or candidate for a written explanation, interview that person, the complainant and third parties, and collect documents. Then they choose one of three outcomes: close the inquiry with no sanction, issue a cautionary letter , or continue proceedings to discipline.
If staff believe a violation occurred, the member or candidate may accept or reject the charges and the proposed sanction. Acceptance ends the matter with that sanction. Rejection sends it to a hearing panel of DRC members, who read the material, hear staff and the member or candidate, and decide whether a violation took place and what sanction fits.
Which sanctions can CFA Institute impose?
- Close the inquiry Memorize no sanction
- Cautionary letter Memorize a warning, not a sanction
- Continue to discipline Memorize accepted, or decided by a DRC panel if rejected
- Public censure Memorize a public rebuke
- Suspension Memorize of membership and use of the designation
- Revocation Memorize of the charter
- Candidates only Use it suspended or barred from the program
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Public censure is a public rebuke. Suspension removes membership and the right to use the designation for a period. Revocation ends the right to use the CFA designation for good. A cautionary letter is a warning that staff can send without any sanction. Candidates who violate the Code, Standards or testing rules may be suspended or prohibited from further participation in the program.
Exam tip Sanctions come from CFA Institute only: censure, suspension, revocation. Fines to clients and criminal penalties are never on the list.
Can a firm or a non-member follow the Code?
The Code and Standards bind individual members and candidates. CFA Institute cannot sanction a firm or a non-member, but it encourages firms to adopt the Code and Standards within their own codes of ethics. A party whose code meets the Code’s principles may make a statement of claiming compliance , worded to say it claims compliance and that CFA Institute has not verified the claim. A separate Asset Manager Code gives firms practical guidelines in six areas, including loyalty to clients, trading and performance.
Go deeper Why self-disclosure is annual and mandatory
A body that waits for complaints will only learn about problems when someone else notices them. The annual statement turns each member into a first line of reporting: anything that could reflect on conduct, such as a lawsuit or a criminal inquiry, has to be put on the record. Failing to disclose is itself a conduct problem, so concealing a matter usually makes things worse than the matter alone.
Go deeper Why the committee is made of practitioners
Investment ethics rarely comes down to a clear statute. Judging whether a member acted with reasonable care or independent judgment takes people who have done the job. Using volunteer charterholders on hearing panels is self-regulation in practice: the profession judges its own standards, which is also why a community’s code needs a disciplinary process behind it (see the first module of this topic).
Memorize this
MemorizeFive sources of a Professional Conduct inquiry
| Source | What it looks like |
|---|---|
| Self-disclosure | Annual Professional Conduct Statement: litigation, a criminal investigation, a written complaint |
| Written complaint | Sent to Professional Conduct staff |
| Public information | Media reports, regulatory notices |
| Proctor report | Exam-day suspected rule breaches (candidates) |
| Post-exam analysis | Score and material analysis, social media monitoring |
Memory hook S-C-P-P-P: Self, Complaint, Public, Proctor, Post-exam. Nothing on the list is poor investment performance.
Know it cold Poor investment performance, or a client grumble that never becomes a written complaint, is not a listed source.
MemorizeProcess, outcomes and sanctions
| Stage | What happens |
|---|---|
| 1. Inquiry | Opens from one of the five sources |
| 2. Investigation | Staff: written explanation, interviews, documents |
| 3. Staff decision | No sanction, cautionary letter, or proceed to discipline |
| 4. Charges | Member or candidate accepts or rejects charges and proposed sanction |
| 5. If rejected | DRC panel decides whether there was a violation and the sanction |
| Sanctions | Public censure, suspension of membership and designation use, revocation of the charter; candidates: suspended or barred from the program |
Memory hook Count down 3-2-1: staff have 3 outcomes, the accused has 2 choices, and 1 panel sits only after a rejection. Sanctions climb C-S-R: censure, suspension, revocation.
Know it cold Panels are for contested cases only. Firms and non-members cannot be sanctioned; they may "claim compliance".
- Board of Governors Know the idea oversight and ultimate responsibility
- Professional Conduct Program (PCP) Memorize staff who investigate and propose outcomes
- Disciplinary Review Committee (DRC) Memorize volunteer charterholders; hearing panels; help set conduct policy
- Close the inquiry Memorize no sanction
- Cautionary letter Memorize a warning, not a sanction
- Continue to discipline Memorize accepted, or decided by a DRC panel if rejected
- Public censure Memorize a public rebuke
- Suspension Memorize of membership and use of the designation
- Revocation Memorize of the charter
- Candidates only Use it suspended or barred from the program
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How it is asked
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Which is a source of inquiry?
Which is least likely to start a Professional Conduct inquiry? One option is a poor year against a benchmark.
Pick the option that is not one of the five sources (self-disclosure, complaint, public information, proctor, post-exam analysis). Performance below a benchmark is not a source.
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Member rejects the sanction
A member rejects the proposed sanction. What happens next?
The matter goes to a DRC hearing panel. Trap: referral to the national regulator, or an automatic cautionary letter.
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Which sanction exists?
Which sanction can CFA Institute impose?
Censure, suspension or revocation. Fines paid to clients and imprisonment are not CFA Institute sanctions.
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Firms and the Code
A firm adopts the Code and Standards. Can CFA Institute sanction the firm?
No. The Code applies to members and candidates. A firm may claim compliance, with the claim unverified by CFA Institute.
Exam traps
- Thinking regulators or the courts enforce the Code. CFA Institute does, for its own members and candidates.
- Thinking a DRC panel hears every case. It sits only when the member or candidate rejects the charges or proposed sanction.
- Forgetting that candidates are covered too. They can be suspended or barred from the program.
- Listing poor performance or a lost client as a source of inquiry. It is not one.
Checkpoint
3 exam-style questions. About 90 seconds each.
1Which of the following is least likely to be a source of a Professional Conduct inquiry?
2A member rejects the charges and the proposed sanction from Professional Conduct staff. The matter is most likely:
3Which of the following sanctions can CFA Institute impose on a member who violates the Standards?
Key takeaways
- The Professional Conduct Program, under the Board of Governors and with the Disciplinary Review Committee, enforces the Code and Standards.
- Five sources of inquiry: self-disclosure, written complaints, public information, proctor reports and post-exam analysis.
- Staff can close the case, send a cautionary letter or proceed; contested cases go to a DRC panel.
- Sanctions run from public censure through suspension to revocation.
All Ethical and Professional Standards formulas, every lesson
Practice exam-style questions on Code of Ethics and Standards of Professional Conduct
Questions about this lesson?
Where this comes back
- Guidance for Standard I: Professionalism Ethical and Professional Standards
- Ethics Application Ethical and Professional Standards
Questions candidates ask
Who enforces the CFA Institute Code of Ethics?
The Professional Conduct Program, under the oversight of the CFA Institute Board of Governors and working with the Disciplinary Review Committee. It applies to CFA Institute members and candidates in the CFA Program, not to firms or non-members.
What sanctions can CFA Institute impose?
Public censure, suspension of membership and of the right to use the CFA designation, and revocation of the charter. Candidates who break the Code and Standards or the testing rules may be suspended or barred from the program.
What is the Disciplinary Review Committee?
A volunteer committee of CFA charterholders. Its members sit on hearing panels that decide contested cases and work with Professional Conduct staff to set and review conduct policy.
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