I pretty much flew solo for my CFA Level I exam - most of my friends were taking Level I with me so I didn’t really have any words of wisdom from more experienced candidates going into preparation for this exam. As a result, nobody advised me on the importance of the Ethics & Professional Standards topic in the CFA exams.
I don’t have my exact CFA Level I exam breakdown anymore, but I don’t remember doing too well on Ethics. It was only in Level II that I really started to realise the importance of being Ethical in every level of the CFA exams.
Ethics is a unique topic in the CFA exams in many ways - ways that make it an absolute must-study all the way from Level I, and I encourage you to make the effort not just to cover it, but master it in the early stages of Level I.
Highly Transferable Knowledge
Ethics is 15% of Level I, and 10% of Level II and III. Although not the largest section, the topics and LOS statements on Ethics are very similar across all levels. This means that the information you retain in Level I will still be exactly applicable in Level III questions. Combine that with the relatively little amount of time needed to master Ethics and suddenly you have a very effort-efficient topic in your hands. Be a master of Ethics in Level I and you’ll see benefits throughout the subsequent levels.
The Ethics Adjustment
Besides its transferable knowledge across levels, Ethics is also unique in a very important way. The CFA Institute implements a factor called the ‘ethics adjustment’ for candidates that are within the passing score. Taken from the CFA website:
The Board of Governors instituted a policy to place particular emphasis on ethics. Starting with the 1996 exams, the performance on the ethics section became a factor in the pass/fail decision for candidates whose total scores bordered the minimum passing score. The ethics adjustment can have a positive or negative impact on these candidates’ final results.
This means that if you’re a borderline fail, you can be lifted into the passing zone by a strong performance in Ethics. Similarly, if you were a borderline pass, you could be failed if your Ethics performance was particularly weak. However, overall the CFA Institute has stated that you’re more likely to be be ‘passed’ through ethics adjustment than ‘failed’.
Front-load on Ethics - you won’t regret it.
usj2 is a CFA charterholder and has dabbled in financial services, advertising and technology. When he’s not messing about with those, he writes on various aspects of the CFA qualification at 300 Hours.