CFA Level 1 Ethics Cheat Sheet

The key Ethical & Professional Standards formulas and decision rules for 2026, module by module. Ethical & Professional Standards is 15-20% of the Level I exam.

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Based on CFA Master registered accounts and sign-in countries, September 2026.

5 modules0 formulas5 decision rules

Most-tested Ethics formulas and rules

The ones to know cold before exam day.

How to resolve an ethical dilemma?

Use when:

  • +Apply the ethical decision-making framework systematically
  • +Consider all stakeholders affected
  • +Choose the action most consistent with the Code of Ethics and professional duty

Avoid when:

  • -Rationalizing by saying "everyone does it"
  • -Choosing the legal minimum when a higher ethical standard applies

When laws conflict with the Code and Standards?

Use when:

  • +Follow the STRICTER of the law or the Code and Standards
  • +If local law is stricter, follow local law
  • +If the Code is stricter, follow the Code

Avoid when:

  • -Assuming local law always takes precedence
  • -Ignoring the Code just because local law permits an action

Mosaic Theory: When can you trade on nonpublic info?

Use when:

  • +Mosaic theory: combine public info + non-material nonpublic info to form a conclusion
  • +Conclusions from public analysis, industry research, expert network (public channels)

Avoid when:

  • -Trading on a single piece of MATERIAL nonpublic information
  • -Pressuring insiders for material information

Ethics cheat sheet by module

Key concepts and formulas from each of the 5 Ethical & Professional Standards modules. Open a module for its lesson page, or the dashboard for the full sheet.

1

Ethics and Trust in the Investment Profession

Ethics Defined

Ethics: set of shared beliefs about what is good or acceptable behavior. Goes beyond legal requirements. A code of ethics communicates an organization's values.

Trust in Investment Management

Clients entrust assets to professionals, creating an asymmetric relationship. Trust is the foundation of the investment profession.

Full sheet: 6 concepts · 1 decision rules

2

Code of Ethics and Standards of Professional Conduct

Code of Ethics (6 Components)

1) Act with integrity, competence, diligence, respect. 2) Place client interests above own. 3) Use reasonable care, independent judgment. 4) Practice and encourage ethical behavior. 5) Promote integrity of capital markets. 6) Maintain and improve professional competence.

Standard I: Professionalism

I(A) Knowledge of the Law, I(B) Independence & Objectivity, I(C) Misrepresentation, I(D) Misconduct, I(E) Competence.

Full sheet: 6 concepts · 1 decision rules

3

Guidance for Standards I–VII

I(A) Knowledge of the Law

Must understand and comply with applicable laws and regulations. Follow the stricter of law or CFA Standards. Must dissociate from violations.

I(B) Independence & Objectivity

Must not offer/accept gifts that could compromise independence. Research must be free from issuer influence. Disclose conflicts.

Full sheet: 8 concepts · 1 decision rules

4

Introduction to GIPS

GIPS Overview

Global Investment Performance Standards: voluntary, ethical standards for calculating and presenting investment performance. Goal: fair, comparable reporting.

Why GIPS Exists

Without GIPS, firms could cherry-pick best-performing accounts. GIPS creates a level playing field for performance comparison across firms and countries.

Full sheet: 5 concepts · 1 decision rules

5

Ethics Application

Applying the Code & Standards

Real-world scenarios require judgment. Multiple standards may apply simultaneously. Focus on identifying which standards are relevant and what action is required.

Common Violation Patterns

Front-running (trading ahead of clients), churning (excessive trading for commissions), misrepresentation of credentials, selective disclosure, conflicts of interest.

Full sheet: 5 concepts · 1 decision rules

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Ethical & Professional Standards study guide

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