What the exam asks
Typical questions ask you to:
- identify why ethics matters to the investment profession;
- explain how trust supports functioning capital markets;
- recognise duties owed to clients, employers, counterparties, and the market;
- distinguish between what is legally allowed and what is ethically right;
- choose the best action using a structured decision process; and
- explain how the CFA Institute Code of Ethics and Standards of Professional Conduct guide behavior.
Core ideas
Ethics defines professional conduct
Ethics concerns principles for right conduct, especially when incentives, pressure, or ambiguity make the easy choice different from the right one. In investment management, ethics matters because professionals often act with:
- specialized knowledge,
- discretion over client assets,
- access to information,
- influence over prices and capital allocation.
That creates a higher standard than merely pursuing profit. Professional conduct must support fair dealing, competent service, and integrity.
Trust is the foundation of the profession
Investors commit savings today in expectation of fair treatment tomorrow. Without trust, they trade less, save less through markets, demand higher risk premiums, and monitor every interaction more aggressively. That raises costs and weakens market efficiency.
| Builds trust | Erodes trust |
|---|---|
| Honesty and transparency | Misrepresentation |
| Fair treatment of clients | Conflicts hidden from clients |
| Competence and diligence | Carelessness or weak controls |
| Respect for market rules | Manipulation or misuse of information |