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Ethical and Professional Standards

Ethical and Professional Standards (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.

In this section

  • Chapter 1: Ethics and Trust in the Investment Profession
    Chapter 1: Ethics and Trust in the Investment Profession (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Defining Ethics and the Importance of Trust
      Defining Ethics and the Importance of Trust (CFA Level 1): Understanding Ethics in Finance, Why Trust Matters, and Cost of Ethical Lapses. Key definitions, formulas, and exam tips.
    • Codes of Ethics and the Investment Profession
      Codes of Ethics and the Investment Profession (CFA Level 1): What Is a Code of Ethics?, Why Codes of Ethics Matter in the Investment, and Comparing Different Codes and Aligning with Core Values. Key definitions, formulas, and exam tips.
    • The Need for High Ethical Standards in Finance
      The Need for High Ethical Standards in Finance (CFA Level 1): Intermediary Role of Finance and Its Ethical, Unethical Practices and Their Impact, and Quick Numeric Illustration. Key definitions, formulas, and exam tips.
    • Differences Between Ethical and Legal Standards
      Differences Between Ethical and Legal Standards (CFA Level 1): Comparing Ethical and Legal Standards, Letter of the Law vs. Spirit of the, and Why Ethical Standards Often Outpace Legal Requirements. Key definitions, formulas, and exam tips.
    • Challenges to Ethical Behavior
      Challenges to Ethical Behavior (CFA Level 1): Key Factors Impeding Ethical Decision-Making, Self-Interest Bias, and Group Pressure. Key definitions, formulas, and exam tips.
    • Ethical Decision‑Making Frameworks
      Ethical Decision‑Making Frameworks (CFA Level 1): Fairness, Transparency, and Accountability, Practical Steps in an Ethical Decision-Making Framework, and Step 1: Identify the Facts. Key definitions, formulas, and exam tips.
    • The Influence of Globalization on Ethical Perspectives
      The Influence of Globalization on Ethical Perspectives (CFA Level 1): Complexity of Cultural and Regulatory Overlaps and Cultural Relativism vs. Universal Ethical Principles. Key definitions, formulas, and exam tips.
  • Chapter 2: Code of Ethics and Standards of Professional Conduct
    Chapter 2: Code of Ethics and Standards of Professional Conduct (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Overview of the CFA Institute Professional Conduct Program
      Overview of the CFA Institute Professional Conduct Program (CFA Level 1): Role and Purpose of the Professional Conduct, How the PCP Receives and Evaluates Complaints, and Disciplinary Process Lifecycle. Key definitions, formulas, and exam tips.
    • The CFA Institute Code of Ethics: Principles and Obligations
      The CFA Institute Code of Ethics: Principles and Obligations (CFA Level 1): Why Ethics Matter in Finance, Foundational Principles of the CFA Institute Code of, and Integrity. Key definitions, formulas, and exam tips.
    • Standards of Professional Conduct: Scope and Structure
      Standards of Professional Conduct: Scope and Structure (CFA Level 1): Breaking Down the Standards, Standard I: Professionalism, and Standard II: Integrity of Capital Markets. Key definitions, formulas, and exam tips.
    • Enforcement and Investigation Procedures
      Enforcement and Investigation Procedures (CFA Level 1): Step-by-Step Outline of the Investigation Process, Triggers for an Investigation, and Collecting Evidence. Key definitions, formulas, and exam tips.
    • Common Violations and Preventative Measures
      Common Violations and Preventative Measures (CFA Level 1): Common Violations in the Investment Profession, Plagiarism of Research, and Misrepresentation of Credentials. Key definitions, formulas, and exam tips.
    • Practical Approaches for Implementing Ethical Standards
      Practical Approaches for Implementing Ethical Standards (CFA Level 1): Translating High-Level Principles into Daily Work, Personal Anecdote (Well, Sort Of), and Creating Robust Compliance Manuals. Key definitions, formulas, and exam tips.
  • Chapter 3: Guidance for Standards I–VII
    Chapter 3: Guidance for Standards I–VII (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.
    • Standard I – Professionalism
      Standard I – Professionalism (CFA Level 1): Knowledge of the Law, Independence and Objectivity, and Misrepresentation. Key definitions, formulas, and exam tips.
    • Standard II – Integrity of Capital Markets
      Standard II – Integrity of Capital Markets (CFA Level 1): Test Your Knowledge: Ensuring Integrity in Capital Markets, In the context of Standard II, which of, and equity analyst builds a forecast by combining. Clear examples and common exam pitfalls.
    • Standard III – Duties to Clients
      Standard III – Duties to Clients (CFA Level 1): Loyalty, Prudence, and Care, Key Exam Tip, and Fair Dealing. Key definitions, formulas, and exam tips.
    • Standard IV – Duties to Employers
      Standard IV – Duties to Employers (CFA Level 1): Defining Loyalty and Employer Obligations, Key Pillars of Standard IV, and Loyalty to Employers. Key definitions, formulas, and exam tips.
    • Standard V – Investment Analysis, Recommendations, and Actions
      Standard V – Investment Analysis, Recommendations, and Actions (CFA Level 1): V(A) Diligence and Reasonable Basis, Building a Research Framework, and Ensuring Adequacy of Research Depth. Key definitions, formulas, and exam tips.
    • Standard VI – Conflicts of Interest
      Standard VI – Conflicts of Interest (CFA Level 1): Understanding Conflicts of Interest, Why It Matters, and Two Primary Effects. Key definitions, formulas, and exam tips.
    • Standard VII – Responsibilities as a CFA Institute Member or CFA Candidate
      Standard VII – Responsibilities as a CFA Institute Member or CFA Candidate (CFA Level 1): Conduct as Participants in CFA Institute Programs, Understanding the Core Requirements, and Avoiding Pitfalls. Key definitions, formulas, and exam tips.
    • Integrating Technological Advancements into Ethical Guidance
      Integrating Technological Advancements into Ethical Guidance (CFA Level 1): Embracing the Evolving Tech Landscape, Data Security and Privacy, and Protecting Confidential Information. Key definitions, formulas, and exam tips.
  • Chapter 4: Introduction to the Global Investment Performance Standards (GIPS)
    Chapter 4: Introduction to the Global Investment Performance Standards (GIPS) (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Purpose, Scope, and Historical Context of GIPS
      Purpose, Scope, and Historical Context of GIPS (CFA Level 1): Origins in the 1980s and 1990s, Why Standardization Was Needed, and Purpose and Scope. Key definitions, formulas, and exam tips.
    • Key Concepts and GIPS Fundamentals
      Key Concepts and GIPS Fundamentals (CFA Level 1): Core Principles of GIPS, Accurate Input Data, and Personal Anecdote. Key definitions, formulas, and exam tips.
    • Composites: Construction and Usage in Reporting
      Composites: Construction and Usage in Reporting (CFA Level 1): What Are Composites?, Key Elements in Composite Construction, and Defining Mandates, Objectives, or Strategies. Key definitions, formulas, and exam tips.
    • GIPS Compliance and Verification
      GIPS Compliance and Verification (CFA Level 1): Defining GIPS Compliance, Why Internal Controls Matter, and Common Internal Control Elements. Key definitions, formulas, and exam tips.
    • Benefits and Challenges of GIPS Adoption
      Benefits and Challenges of GIPS Adoption (CFA Level 1): Key Benefits of GIPS Compliance, Differentiation in a Competitive Market, and Building Trust with Clients. Key definitions, formulas, and exam tips.
    • Case Studies on GIPS for Emerging Market Firms
      Case Studies on GIPS for Emerging Market Firms (CFA Level 1): Key Challenges for GIPS Compliance in Emerging Markets and Regulatory Landscape and Data Reliability. Key definitions, formulas, and exam tips.
  • Chapter 5: Applying Ethical Standards and Professional Knowledge
    Chapter 5: Applying Ethical Standards and Professional Knowledge (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Practical Case Studies in Ethical Dilemmas
      Practical Case Studies in Ethical Dilemmas (CFA Level 1): Common Ethical Pitfalls in Finance and Ethical Decision-Making Framework. Key definitions, formulas, and exam tips.
    • Best Practices for Ethical Decision Making
      Best Practices for Ethical Decision Making (CFA Level 1): Role of Professional Skepticism, Five-Phase Ethical Decision-Making Process, and Phase 1: Awareness. Key definitions, formulas, and exam tips.
    • Integrating Ethics into Daily Investment Analysis
      Integrating Ethics into Daily Investment Analysis (CFA Level 1): Embedding Ethics in the Research Process, Spotting Red Flags, and Importance of Due Diligence. Key definitions, formulas, and exam tips.
    • Regulatory Developments and Emerging Ethical Issues
      Regulatory Developments and Emerging Ethical Issues (CFA Level 1): Recent Global Regulatory Developments, Data Privacy Laws, and Anti-Corruption Regulations and Transparency Initiatives. Key definitions, formulas, and exam tips.
    • The Broader Impact of Ethical Leadership in Finance
      The Broader Impact of Ethical Leadership in Finance (CFA Level 1): How Ethical Leadership Transcends Compliance, Positive Ripple Effects on the Finance Industry, and Examples of Firms Embracing Ethical Values. Clear examples and common exam pitfalls.
    • Ethical Considerations in Collaboration and Outsourcing
      Ethical Considerations in Collaboration and Outsourcing (CFA Level 1): Growing Trend of Outsourcing in Finance, Potential Ethical Complications, and Vetting Third-Party Providers. Key definitions, formulas, and exam tips.
  • Chapter 6: Global Regulatory Frameworks and Industry Collaboration
    Chapter 6: Global Regulatory Frameworks and Industry Collaboration (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Cross-Border Ethical Standards and Investor Protection
      Cross-Border Ethical Standards and Investor Protection (CFA Level 1): Global Nature of Financial Markets, Importance of Standardized Ethical Conduct, and Major International Frameworks and Agreements. Key definitions, formulas, and exam tips.
    • Coordinating Bodies and Their Roles in Finance
      Coordinating Bodies and Their Roles in Finance (CFA Level 1): Test Your Knowledge: Global Coordinating Bodies and Financial and Which of the following best describes the role. Key definitions, formulas, and exam tips.
    • International Legal Environments and Ethical Implications
      International Legal Environments and Ethical Implications (CFA Level 1): Civil Law Systems, Common Law Systems, and Religious Law Systems. Key definitions, formulas, and exam tips.
    • Technology-Driven Regulation and Ethical Challenges
      Technology-Driven Regulation and Ethical Challenges (CFA Level 1): Which of the following best describes RegTech? and Which cybersecurity measure is most critical for ensuring. Key definitions, formulas, and exam tips.
    • Integrating Local Customs with Global Ethics
      Integrating Local Customs with Global Ethics (CFA Level 1): Role of Cultural Values and Local Customs and Honoring Local Traditions Without Compromising Principles. Key definitions, formulas, and exam tips.
    • Strategies for Harmonizing Diverse Regulatory Regimes
      Strategies for Harmonizing Diverse Regulatory Regimes (CFA Level 1): Challenges of Divergent Regulatory Regimes, Strategies for Harmonization, and Aligning Internal Rules to the Most Stringent Standards. Key definitions, formulas, and exam tips.
    • Future Trends in Global Regulation (Added Topic)
      Future Trends in Global Regulation (Added Topic) (CFA Level 1): Key Global Macro Trends, Emergence of Principle-Based Regulation, and Diagram: Rules vs. Principles. Key definitions, formulas, and exam tips.
  • Chapter 7: Behavioral Finance in Ethical Decision Making
    Chapter 7: Behavioral Finance in Ethical Decision Making (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Influence of Cognitive Biases on Ethical Conduct
      Influence of Cognitive Biases on Ethical Conduct (CFA Level 1): Understanding the Foundations of Cognitive Bias, Common Biases in Ethical Decision Making, and Confirmation Bias. Key definitions, formulas, and exam tips.
    • Emotional Biases and Decision-Making Pitfalls
      Emotional Biases and Decision-Making Pitfalls (CFA Level 1): Distinguishing Emotional Biases from Cognitive Biases, Key Emotional Biases in Ethical Context, and Loss Aversion. Key definitions, formulas, and exam tips.
    • Cultural and Organizational Pressures
      Cultural and Organizational Pressures (CFA Level 1): National Culture and Ethical Decision Making, Power Distance, and Collectivism vs. Individualism. Key definitions, formulas, and exam tips.
    • Addressing Groupthink and Herding Behavior
      Addressing Groupthink and Herding Behavior (CFA Level 1): Understanding Groupthink, Characteristics of Groupthink, and Real-World Examples of Groupthink. Key definitions, formulas, and exam tips.
    • Frameworks for Overcoming Bias in Ethical Judgments
      Frameworks for Overcoming Bias in Ethical Judgments (CFA Level 1): Common Frameworks in Ethical Decision Making, ICAR: Identify, Consider, Act, Reflect, and MED: Making Ethical Decisions. Key definitions, formulas, and exam tips.
    • Lessons from Behavioral Ethics in Negotiation and Client Relations
      Lessons from Behavioral Ethics in Negotiation and Client Relations (CFA Level 1): Bridging the Gap Between “Should” and “Do”, Core Behavioral Biases in Negotiation, and Behavioral Ethics Feedback Loop. Key definitions, formulas, and exam tips.
  • Chapter 8: Sustainability and Corporate Responsibility
    Chapter 8: Sustainability and Corporate Responsibility (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • ESG Standards and the Evolution of Ethical Investing
      ESG Standards and the Evolution of Ethical Investing (CFA Level 1): Historical Evolution: From SRI to ESG, Three Pillars: Environmental, Social, and Governance, and Environmental Factors. Key definitions, formulas, and exam tips.
    • Sustainable Practices and Stakeholder Engagement
      Sustainable Practices and Stakeholder Engagement (CFA Level 1): Expanding the Concept of Sustainability, Defining Stakeholder Engagement, and Why Stakeholder Engagement Matters. Key definitions, formulas, and exam tips.
    • Social Responsibility and Long-Term Profitability
      Social Responsibility and Long-Term Profitability (CFA Level 1): Social Responsibility as a Strategic Imperative, Corporate Reputation, Trust, and Investor Confidence, and Triple Bottom Line (TBL). Key definitions, formulas, and exam tips.
    • Ethical Considerations in Impact Investing
      Ethical Considerations in Impact Investing (CFA Level 1): Understanding Impact Investing, Approaches to Impact Investing, and Ethical Principles Shaping Impact Investing. Key definitions, formulas, and exam tips.
    • Regulatory Perspectives on Sustainability Disclosures
      Regulatory Perspectives on Sustainability Disclosures (CFA Level 1): Growing Trend of Mandated Sustainability Disclosures, Why Mandatory Disclosures?, and Key Regional Regulations. Key definitions, formulas, and exam tips.
    • Community Development Initiatives and Ethical Investment
      Community Development Initiatives and Ethical Investment (CFA Level 1): Understanding Community Development Initiatives and Role of Ethical Investment in Community Development. Key definitions, formulas, and exam tips.
  • Chapter 9: Advanced GIPS Topics and Ethical Performance Reporting
    Chapter 9: Advanced GIPS Topics and Ethical Performance Reporting (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Complex GIPS Scenarios in Practice
      Complex GIPS Scenarios in Practice (CFA Level 1): Handling Non-Traditional Portfolio Structures, Hedge Funds and Multi-Strategy Funds, and Private Equity. Key definitions, formulas, and exam tips.
    • Carve-Outs, External Performance, and Attribution Methods
      Carve-Outs, External Performance, and Attribution Methods (CFA Level 1): Carve-Outs: Why They Matter, Dedicated Cash Allocation, and Potential Missteps and Ethical Dilemmas. Key definitions, formulas, and exam tips.
    • Ensuring Accuracy and Consistency in GIPS Reports
      Ensuring Accuracy and Consistency in GIPS Reports (CFA Level 1): Standardized Methodologies for Calculating Performance, Time-Weighted Rate of Return (TWRR), and Money-Weighted Rate of Return (MWRR). Key definitions, formulas, and exam tips.
    • Ethical Implications of Reporting Practices
      Ethical Implications of Reporting Practices (CFA Level 1): Foundation of Transparency and Honesty, Quick Anecdote on Transparency, and Conflicts of Interest in Performance Reporting. Key definitions, formulas, and exam tips.
    • Future Developments in Global Performance Standards
      Future Developments in Global Performance Standards (CFA Level 1): Impact of Emerging Asset Classes, Harmonizing GIPS and IFRS, and Potential for Automated Performance Calculations (Blockchain and DLT). Key definitions, formulas, and exam tips.
    • Incremental Revisions and Transitional Reporting Challenges
      Incremental Revisions and Transitional Reporting Challenges (CFA Level 1): Understanding the GIPS Updating Process, How Incremental Revisions Are Shaped, and Key Historical Overhauls (Why They Matter). Key definitions, formulas, and exam tips.
  • Chapter 10: Leadership, Crisis Management, and the Future of Ethics
    Chapter 10: Leadership, Crisis Management, and the Future of Ethics (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.
    • Ethical Leadership Theories in Finance
      Ethical Leadership Theories in Finance (CFA Level 1): Need for Ethical Leadership in Finance, Key Benefits of Ethical Leadership, and Transformational Leadership. Key definitions, formulas, and exam tips.
    • Crisis Management and Rebuilding Trust
      Crisis Management and Rebuilding Trust (CFA Level 1): Types of Crises in Finance, Step-by-Step Framework for Crisis Management, and Identify Potential Crisis. Key definitions, formulas, and exam tips.
    • Lessons from Past Financial Misconduct Cases
      Lessons from Past Financial Misconduct Cases (CFA Level 1): Classic Examples of Financial Misconduct, Corporate Accounting Scandals, and Insider Trading Convictions. Key definitions, formulas, and exam tips.
    • Fostering a Culture of Integrity Through Mentorship
      Fostering a Culture of Integrity Through Mentorship (CFA Level 1): Role of Mentorship in Building Ethical Culture and Knowledge Transfer vs. Ethical Skill-Building. Key definitions, formulas, and exam tips.
    • Evolving Ethical Standards in a Changing Global Landscape
      Evolving Ethical Standards in a Changing Global Landscape (CFA Level 1): Concept of Ethical Agility, Navigating Cross-Border Investments, and Balancing Local Laws and Global Norms. Key definitions, formulas, and exam tips.
    • Ethics in a Decentralized Finance Environment
      Ethics in a Decentralized Finance Environment (CFA Level 1): Understanding DeFi Fundamentals, Twofold Promise, and Trust and Accountability in a Decentralized Setting. Key definitions, formulas, and exam tips.
  • Chapter 11: Emerging Trends in Ethical Innovation
    Chapter 11: Emerging Trends in Ethical Innovation (CFA Level 1): Practical explanations of core ideas, with key terms, formulas, and common exam pitfalls.
    • Robo-Advisory Services and Ethical Impacts
      Robo-Advisory Services and Ethical Impacts (CFA Level 1): Which statement best describes a key advantage of and client's information indicates a short-term goal and. Key definitions, formulas, and exam tips.
    • Blockchain Applications and Transparency in Finance
      Blockchain Applications and Transparency in Finance (CFA Level 1): Foundations of Blockchain Technology, Core Concepts, and Structure of a Typical Blockchain. Key definitions, formulas, and exam tips.
    • Data Privacy and Security for AI-Driven Analytics
      Data Privacy and Security for AI-Driven Analytics (CFA Level 1): Expanding Role of AI in Financial Analytics, Data Collection and Privacy Risks, and Understanding the Privacy Challenges. Key definitions, formulas, and exam tips.
    • Truthfulness and Accountability in Algorithmic Trading
      Truthfulness and Accountability in Algorithmic Trading (CFA Level 1): High-Speed Execution and the Need for Ethical Oversight and Ethical Concerns and Potential Market Manipulation. Key definitions, formulas, and exam tips.
    • The Future of Underregulated Digital Assets
      The Future of Underregulated Digital Assets (CFA Level 1): Evolving Landscape of Digital Assets, Key Terminology, and Current Regulatory Gap and Ethical Challenges. Key definitions, formulas, and exam tips.
  • Chapter 12: Cross-Disciplinary Approaches to Ethics in Finance
    Chapter 12: Cross-Disciplinary Approaches to Ethics in Finance (CFA Level 1): Key concepts explained with clear definitions, formulas, and exam-focused examples.

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Volume 9: Portfolio Management