Even with the change to topic area weights on the CFA exams this year, CFA Ethics and Professional Standards remain extremely important. It is a lot of material but fortunately doesn’t change much from year to year and you’ve got a real opportunity to carry over some points to each exam if you learn it early.
Before we get into a quick review of the key points I want to stress one thing: Do NOT underestimate the topic area and the need to work practice problems! The topic is worth between 10% and 15% of your total score on each exam. A lot of candidates scan the readings and then neglect doing any real studying or problems.
The problem is that the Ethical and Professional Standards all seem pretty obvious. Everyone knows you shouldn’t take advantage of clients and trade on inside information. Candidates look at the material and think, “I’m a pretty ethical person. I don’t lie, cheat or steal. The correct answer on the exam will be obvious to me.” Then they get to the exam and have a heart attack!
The CFA Institute is surprisingly good at designing questions where two of the answer choices seem possible, even to someone with a good moral compass. That is why it is absolutely a must to work practice problems in the topic area. Learn how the Institute writes out the vignette and what to look for in the correct answer.
The Professional Conduct Program (PCP)
The PCP is not usually a big focus of the exams but you might get a question. Remember where the complaint can come from: media scrutiny, exam proctors, written notes or self-disclosure. Understand that while your subordinates might not be held to the Code and Standards, a supervisor with the CFA designation is still responsible for their actions.
After an inquiry is started, information is collected and one of three outcomes occurs. There may be no sanctions recommended, a cautionary letter could be issued or the inquiry is sent to the next level for further work. You can accept or contest the outcome and request that it be escalated to a panel.
Components of the Code – CFA Ethics
I’ve always used the acronym SPAMED to remember components of the code. The truth is that you probably won’t get a question on one of the six codes but will instead see questions on application of the Code and Standards.
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