Posted by: Kaplan Schweser
Published: January 14, 2020
All CFA® charter candidates and CFA Institute members must agree to abide by a code of ethics and professional conduct that protects the integrity of CFA Institute membership, designations, and exam programs. You need to be in compliance with them at all times. Some of the standards, violations, and sanctions can take candidates and charterholders by surprise. This article shares some examples.
CFA Institute Code of Ethics and Standards of Professional Conduct require charterholders and candidates to put the interests of their clients above their own and to act with integrity, respect, and professional competence. Serious disciplinary actions are taken against anyone who violates the code and standards. For industry-related violations, CFA Institute maintains a list of professionals who have been sanctioned and why, and they keep statistics for all sanctions.
Some violations are easy to understand and remember. A felon can expect a permanent revocation of the CFA charter. Those who violate the standards but are not convicted of a crime are likely to receive a summary suspension, which automatically terminate:
Some of these standards can be applied more broadly than you might think, which can result in unexpected notices of violations and investigations. Here are some examples.
The sanctions listed by CFA Institute for misrepresentation include censure, prohibition, and summary suspension. A charterholder who wrote a report and claimed it was his original research received a written censure after it was later revealed that he copied and pasted from other sources. Although this is a clear case of misrepresentation, there are others that are not so obvious. For example, a Level I candidate was permanently prohibited from being a charterholder or CFA Institute member for manually editing a spreadsheet, so it appeared he had met his firm’s call quota.
Misconduct can result in a summary suspension or a timed suspension from CFA Institute. In 2019, a charterholder was suspended for selling and teaching courses using study materials owned by his employer and violating intellectual property rights. Another example is a CFA charter candidate who was suspended for a year for misconduct for buying CFA Level II preparation materials from an approved provider, putting them in a Google drive, and using a chat group to sell and redistribute them.
Not cooperating with CFA Institute investigations is almost as serious as the violation itself and can result in the revocation of the charter. One charterholder received a summary suspension for failing to cooperate during such an investigation into bribery. He, representatives from a sports apparel company, and several NCAA men’s college basketball coaches were charged with paying high school players and their families to play for specific universities. Separately, he asked players to agree to use him as a financial adviser when they signed professional contracts. Although he later served as a crucial witness in the resulting trial, his charter was revoked when he did not request a review hearing.
Another example is a CFA charter candidate who received a summary suspension for not cooperating with an investigation into the allegation that she claimed to be a “CFA Level II charterholder” on her LinkedIn profile. Using the CFA designation when CFA Institute membership has lapsed is also a CFA code of ethics violation, and the outcome of failing to cooperate in an investigation of the misuse is usually a summary suspension.
CFA Institute also sanctions individuals for not abiding by the candidate pledge they sign at the exam testing center before each level of the exam or for violating code of ethics during or after sitting for the exam. The sanctions include private reprimands, suspension of rights to participate in the exam for one to five years, and a permanent ban from CFA program participation.
One of the most common CFA Institute code of ethics violations for the exam is failing to stop erasing or writing when the proctor says to put pencils down. Most candidates get private reprimands for this violation, but some are not allowed to participate in the exam for a year. One candidate posted in Analyst Forum that he received a letter from CFA Institute that he was writing for four minutes after time was called. He was informed that he was not eligible to participate in the CFA Program until the investigation was completed.
Other exam violations include:
Assisting with the exam is the violation that is most likely to result in being permanently banned from participating in the program.
Understanding CFA Institute code and standards is critical to passing the CFA exam. Exam preparation courses and packages can help you get up to speed on all the rules, so you are not surprised on exam day or in your future career.