Standard I(D): Misconduct
Do not engage in professional conduct involving dishonesty, fraud or deceit, or commit any act that reflects adversely on your professional reputation, integrity or competence. Professional conduct covers work, the markets and the profession, and any use of the charter or candidacy. Purely private dishonesty is outside I(D).
Before this: Standard I(C): Misrepresentation
On the exam
- Demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity
- Recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct
- Identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards
Demonstrate I(D), recommend compliance practices and identify compliant conduct. Expect "personal life or professional misconduct?" items. The traps are treating any personal legal trouble, or any private dishonesty, as misconduct, and missing that dishonesty is covered once it uses the charter or candidacy or happens in a society role.
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.
What does Standard I(D) require?
Misconduct under I(D) has two limbs. You must not engage in professional conduct involving dishonesty, fraud and deceit , and you must not commit any act that reflects adversely on your professional reputation , integrity or competence.
Memorize
- Lying, cheating, stealing and other dishonest acts breach the Standard when they are part of your professional conduct (see the next section). Dishonesty in purely private life, with no tie to your work or the profession, does not.
- Conduct that is not illegal can still breach it if it damages your trustworthiness or competence, such as abusing alcohol during working hours.
- Doing too little can also breach it: a recommendation made without the due diligence needed to understand an investment, relying on someone else to have done it, betrays the trust clients place in you.
- The Standard is not meant to police personal behavior . CFA Institute is aware that complaints are sometimes used to settle personal or political disputes, and has safeguards against that.
- Professional conduct Memorize I(D) can apply
- Dishonesty, fraud or deceit in the workplace, or when using the charter, candidacy or a society role
- Acts that damage integrity or competence for example working while impaired
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- Not professional conduct Memorize generally not covered
- Peaceful civil disobedience not dishonest
- Personal bankruptcy unless it involved fraudulent or deceitful business conduct
- A dishonest act in private life no tie to work, the markets, the charter or candidacy
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What counts as professional conduct?
According to the Handbook (12th edition, 2024), professional conduct is conduct relating to financial analysis, investment management, security analysis, stewardship or similar activity, that either (1) happens in the workplace, in academia or in taking part in the profession or the markets, or (2) uses the CFA charter, the Certificate in Investment Performance Measurement (CIPM), CFA Institute or society membership, or candidacy.
Memorize
Listed examples of professional activity:
- dealings with colleagues and clients;
- presenting yourself as a charterholder or candidate;
- volunteering for CFA Institute or a society;
- attending industry events;
- writing about investments outside work, such as blogs and books;
- communicating with regulators in a professional capacity.
- Where it happens Memorize any one is enough
- The workplace colleagues, clients, expense claims
- Academia teaching or research on investments
- The profession or markets industry events, writing about investments, regulators
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- What it uses Memorize any one is enough
- The charter or a related credential CFA charter, CIPM
- CFA Institute or society membership including volunteering
- Candidacy presenting yourself as a candidate
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The consequence is the point to learn. A dishonest act outside professional conduct is not an I(D) violation. A charterholder who files a false insurance claim on her own house has done wrong, but not under this Standard. The same lie becomes a violation when it trades on the charter or candidacy, or happens while volunteering for a society: a candidate who tells a prospective client that he has passed an exam he has not, or a volunteer who pockets a society’s event fees.
Where are the lines?
| Situation | Verdict |
|---|---|
| Padding an expense report with a family dinner | Violation: dishonesty |
| Regularly coming to client meetings intoxicated | Violation: reflects on competence |
| Arrested at a peaceful protest | Generally not a violation |
| Filing for personal bankruptcy after a medical emergency | Not by itself a violation |
| Overstating income on a personal mortgage application, no link to work | Not an I(D) violation: dishonest, but not professional conduct |
| Claiming on home insurance for damage that never happened | Not an I(D) violation: private, no tie to the profession |
| Telling a prospective client you have passed an exam you have not | Violation: dishonesty that uses candidacy |
| Taking a society’s event fees while volunteering as its treasurer | Violation: dishonesty in a society role |
Exam tip Ask two questions in order. First: is it professional conduct (work, the markets, the profession, or does it use the charter, candidacy or a society role)? Then: is it dishonest, or does it hurt my professional integrity or competence? A private act, even a dishonest one, is outside I(D).
Compliance practices
For firms:
- Code of ethics. Adopt one that every employee signs, making clear that behavior reflecting poorly on the individual, the firm or the industry is not tolerated.
- List of violations. Give staff a list of potential violations and the sanctions, up to dismissal.
- Employee references. Check the references of potential hires to confirm good character and that they are not barred from the industry because of past infractions.
Go deeper Why the Standard targets dishonesty, not private morality
An investment professional’s product is trust: clients hand over money on the strength of their adviser’s honesty. Dishonesty in professional conduct, including any use of the charter or candidacy, puts that trust at risk, so the Standard covers it. Private dishonesty and private views belong to other rules and to the law, so the Standard stays out of them. The line also protects members from having the Standard used against them in disputes that have nothing to do with their professional work.
Go deeper Links to I(A) and VII(A)
I(A) asks whether you complied with the law that governs your work. I(D) is broader: an act can be perfectly legal and still be misconduct if it is dishonest or damages your standing. Cheating in a CFA exam or breaching its rules is dealt with specifically in VII(A), which protects the integrity of the CFA program.
Memorize this
MemorizeStandard I(D): the test
| Question | If yes |
|---|---|
| Is it professional conduct? (work, academia, the profession or markets, or it uses the charter, candidacy or a society membership) | Then I(D) can apply. If not, generally not covered |
| Is that conduct dishonest, fraudulent or deceitful? | Misconduct |
| Does it damage your professional integrity, reputation or competence (for example working impaired)? | Misconduct |
| Is it purely private conduct, with no tie to the profession? | Generally not covered, even if dishonest |
Memory hook Professional first, then dishonest: ask whether it is professional conduct before asking whether it is dishonest.
Know it cold Firm compliance practices: a code of ethics, a list of violations and sanctions, and reference checks on new hires.
MemorizeWhat counts as professional activity
| Professional activity | Example |
|---|---|
| Dealing with colleagues and clients | An expense claim, a client meeting |
| Presenting yourself as a charterholder or candidate | A CV, a biography, a business card |
| Volunteering for CFA Institute or a society | Running a society event, teaching a review course |
| Attending industry events | A conference or a networking evening |
| Writing about investments outside work | A blog or a book |
| Communicating with regulators in a professional capacity | A consultation response |
Memory hook Work, the markets, the profession, or the letters: if you use any of them, it is professional.
Know it cold Professional conduct: conduct relating to financial analysis, investment management, security analysis, stewardship or similar that happens in the workplace, academia or the profession or markets, or uses the CFA charter, CIPM, CFA Institute or society membership, or candidacy.
- Professional conduct Memorize I(D) can apply
- Dishonesty, fraud or deceit in the workplace, or when using the charter, candidacy or a society role
- Acts that damage integrity or competence for example working while impaired
-
- Not professional conduct Memorize generally not covered
- Peaceful civil disobedience not dishonest
- Personal bankruptcy unless it involved fraudulent or deceitful business conduct
- A dishonest act in private life no tie to work, the markets, the charter or candidacy
-
- Where it happens Memorize any one is enough
- The workplace colleagues, clients, expense claims
- Academia teaching or research on investments
- The profession or markets industry events, writing about investments, regulators
-
- What it uses Memorize any one is enough
- The charter or a related credential CFA charter, CIPM
- CFA Institute or society membership including volunteering
- Candidacy presenting yourself as a candidate
-
How it is asked
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Padded expenses
An analyst submits receipts from a family birthday as client entertainment. Violation?
Yes, I(D): dishonesty. Trap: "the amount was small".
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Arrest at a protest
A manager is arrested at a peaceful march and released without charge. Violation?
No. Not dishonest and unrelated to professional work. Trap: "any arrest reflects poorly".
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Dishonest, but private
A charterholder invents a damage claim on her own home insurance. The claim has nothing to do with her work. Violation of I(D)?
No. Dishonest, but not professional conduct. Trap: "dishonesty anywhere counts".
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Dishonest and uses the credential
A Level I candidate pitching to manage a local club's savings says he has passed Level II. Violation?
Yes, I(D). Dishonesty tied to candidacy and investment management is professional conduct.
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Preventing misconduct
Which firm procedure best helps prevent misconduct?
Check references and backgrounds before hiring (plus code of ethics and sanctions list). Traps: ban personal investing; social media hours.
Exam traps
- Treating all personal legal trouble as misconduct. An arrest or a bankruptcy is not, by itself.
- Calling every dishonest act a violation. A lie in purely private life, with no tie to work, the markets or the charter, is not an I(D) violation.
- Missing that dishonesty becomes professional conduct once it uses the charter or candidacy, or happens while volunteering for a society.
- Excusing small dishonesty because the amount is small.
- Confusing I(D) with I(A). I(A) is about complying with laws; I(D) is about conduct that reflects badly on integrity or competence.
Checkpoint
3 exam-style questions. About 90 seconds each.
1An analyst submits restaurant receipts from a family birthday as client entertainment expenses. Did the analyst violate the Standards?
2A portfolio manager is arrested at a peaceful street march over transport fares on a weekend and released without charge. Did the manager violate Standard I(D)?
3Which firm procedure best helps prevent misconduct?
Key takeaways
- No dishonesty, fraud or deceit; nothing that undermines professional integrity, reputation or competence.
- Professional conduct includes work, academia, the markets and the profession, and any use of the charter, candidacy or a society membership.
- Dishonest acts outside professional conduct are not I(D) violations; dishonesty that uses the charter or candidacy is.
- Firms prevent misconduct with a code of ethics, a list of sanctions and reference checks.
All Ethical and Professional Standards formulas, every lesson
Practice exam-style questions on Guidance for Standard I: Professionalism
Questions about this lesson?
Where this comes back
- Standard I(E): Competence Guidance for Standard I: Professionalism
- Standard VII(A): Conduct as Participants in CFA Institute Programs Guidance for Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate
Questions candidates ask
What is misconduct under the CFA Standards?
Professional conduct involving dishonesty, fraud or deceit, or any act that reflects adversely on your professional reputation, integrity or competence. Lying on an expense claim and working while impaired are typical examples.
Does personal behavior violate Standard I(D)?
Usually not. I(D) covers professional conduct. A dishonest act in purely private life, with no tie to work, the markets, the charter or candidacy, is not an I(D) violation. Dishonesty that uses the charter or candidacy, or happens in a society role, is.
What counts as professional conduct under Standard I(D)?
Conduct relating to financial analysis, investment management, security analysis, stewardship or similar that happens in the workplace, academia or the profession or markets, or that uses the CFA charter, candidacy or a society membership. Volunteering and writing about investments count.
Is personal bankruptcy a violation of the CFA Code?
Not by itself. Bankruptcy after a medical emergency does not reflect on integrity. If it involved fraudulent or deceitful business conduct, it could breach I(D).
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