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Eduzan / MODULE 01 — Ethics (Ethical and Professional Standards)

ETH 9 Guidance for Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate

How Standard VII governs conduct inside CFA Institute programs and how a member or candidate may refer to CFA Institute, the CFA designation, and candidacy. Check-yourself items are study aids.

Standard VII(A) states that members and candidates must avoid any behavior that would damage the standing of CFA Institute or of the designation, or that would weaken how sound, valid, and secure its programs are.

What the standard covers

CFA Institute runs a range of educational and credentialing programs beyond the CFA charter itself, and this standard reaches conduct in any of them. The aim is to keep the public confident that these programs are sound. One boundary is worth noting: the standard does not force every program participant to follow the Code and Standards. A person becomes bound by the Code and Standards only if he or she is already a member or candidate; for those people, Standard VII(A) then governs how they behave in the program.

Conduct that is prohibited

The standard lists conduct that breaches it, though the list is not exhaustive:

giving or receiving help, that is, cheating, on any CFA Institute examination;
breaking the rules, regulations, or testing policies of a CFA Institute program;
passing confidential program or exam material to candidates or to the public;
ignoring or trying to get around the security controls placed on an examination;
leaning on an association with CFA Institute to serve personal or professional ends improperly; and
giving CFA Institute false information about any of its programs.

Confidential program information

CFA Institute guards the content and process of its exams closely. Anyone taking part in a program must not disclose confidential material learned through that participation. The confidential category includes, among other things, the specifics of questions that appeared on an exam, and the broad topic areas or formulas that were or were not tested. Every part of an exam stays confidential until CFA Institute chooses to make it public, which is what lets the organization keep future exams rigorous and fair.

The rule does not shut down ordinary preparation. Candidates remain free to discuss material that is not confidential, including within study groups, as they get ready for an exam. Because many candidates prepare using online tools, CFA Institute monitors blogs, forums, and social networking groups, and it moves quickly to take down anything that leaks confidential material or otherwise breaks its rules. Candidates, members, and the public are all encouraged to report suspected breaches.

Allowed preparation versus a leak

The dividing line is content, not effort. Working through practice material, comparing study notes, or debating a concept in a group is all permitted. What tips into a violation is revealing what a live exam actually contained: which questions came up, which topics were heavy or absent, or the formulas that were tested. Saying an exam felt hard is fine; saying the exam was full of swap-valuation questions is not.

Volunteers with CFA Institute programs

Members who volunteer, for example by helping develop, administer, or grade exams, often see confidential material. The standard bars them from offering, requesting, or disclosing that material to anyone not authorized to have it. Off-limits information includes questions that appear on an exam or are still under consideration, the deliberations behind the exam process, and anything about how questions are scored.

Expressing an opinion

The standard places no bar on members and candidates voicing views about CFA Institute. A person may disagree openly with its policies, its procedures, or the advocacy positions it takes. The one limit is that a personal opinion must never carry confidential exam content with it, such as actual questions or the subjects an exam did or did not cover.

Example 1 · Worked

Just after finishing the Level II exam, a candidate named Rossi writes a public social media post about her day. She says the exam was tough but fair, that she thinks she did well, that derivatives came up a great deal (she reckons she counted about 18 items), that the ethics questions were hard, and that she was surprised nothing appeared on IPO allocations.

1. Which parts of the post, if any, breach Standard VII(A)?

Solution. Commenting that the exam felt difficult, or that she believes she performed well, is fine, because those are personal impressions. The breach is in describing what the exam did and did not contain: the heavy weighting of derivatives and the absence of IPO allocation questions. Those details are confidential exam content, and revealing them can give an unfair edge to candidates who have not yet sat the same exam, so that portion of the post violates Standard VII(A).

Example 2 · Worked

Nero, a candidate, comes across what looks like a copy of the Level II exam. He is not certain it is genuine, but he posts several of the questions in an online chatroom used by other candidates. When two of them ask for more, he posts those too, and all three then study from the material.

1. Who has violated the standard?

Solution. All three. By handing exam questions to others, Nero gave them an unfair advantage and weakened the exam as a fair test of the ability needed to earn the charter, so he violated Standard VII(A). The two who asked for the questions and used them also undermined the exam’s integrity and validity, so they breached the standard as well. Whether the copy was authentic does not change the outcome.

Example 3 · Worked

Warrenski serves on the CFA Institute GIPS Standards Technical Committee. That body oversees and steers development of the GIPS standards. Her seat gives her advance sight of confidential, not-yet-public changes the committee is weighing. She informs clients that sitting on the committee will help her keep them ahead of those changes and in compliance with them.

1. Assess her conduct.

Solution. Warrenski used a volunteer position to promote her firm and implied she would draw on confidential committee information to further client interests. That represents her role as a business advantage over competitors and damages the reputation and integrity of CFA Institute, violating Standard VII(A). She may state as a fact that she sits on the committee, but she cannot suggest that the seat gives her clients any special advantage.

Example 4 · Worked

Chiu is registered for the Level I exam, and as the date nears she realizes she is not ready. A paid deferral is available, but she notices the emergency deferral is free, so she files an emergency request falsely claiming that her uncle has died. CFA Institute rejects it, because that is not a valid basis under the current rules. She then files a second request claiming her mother has died, attaching a death certificate identical to the first except for the changed name. Later she admits no one died and that she altered the document to avoid the fee.

1. Which standards are involved?

Solution. Filing a fraudulent emergency deferral broke CFA Program rules and compromised the integrity of the exam, so it violated Standard VII(A). Because she also submitted falsified documentation, she breached Standard I(C) Misrepresentation at the same time.

Check yourself

A candidate takes a slip of paper with formulas written on it into a computer-based testing room and is caught pulling it out during the exam. Has the standard been breached?

Yes. Bringing written material into the exam room breaks the testing rules and compromises the security and integrity of the exam, as well as the validity of that candidate’s performance, so it violates Standard VII(A).

Frustrated after the Level II exam, a candidate posts a complaint on a third-party provider’s forum saying the course left her unprepared for the many questions on the analysis of inventories and taxes. Does the post violate the standard?

Yes. Complaining about a prep provider or offering an opinion on the exam is allowed, but naming the specific topics that were tested discloses confidential exam content, which breaches Standard VII(A). Using outside study material is not itself a violation.

Standard VII(B) states that when members and candidates refer to CFA Institute, to CFA Institute membership, to the CFA designation, or to candidacy in the CFA Program, they must not misrepresent or exaggerate what any of those things means or implies.

Factual references only

The purpose is to keep such references truthful and to block unsupported claims that tie competence or performance to membership, the designation, or candidacy. The standard does not prohibit factual statements about the genuine benefits of earning the charter; those benefits are real. What it forbids are statements that overstate a person’s competence, or that assert or imply that someone with the CFA designation can be expected to deliver superior results.

Some references are clearly acceptable. A person may highlight the commitment of members, charterholders, and candidates to ethical and professional conduct, or point to the thoroughness and rigor of the exams. A person may also weigh the relative merits of CFA Institute, of the exams, or of the Code and Standards, provided such remarks are framed, openly or by clear implication, as the speaker’s own view. Any statement that is not an opinion has to be backed by facts.

The standard applies to every form of communication. That includes written and electronic material: business cards, firm letterhead, directory listings, professional biographies, printed advertisements, websites, LinkedIn pages, email signatures, and resumes, and it includes anything said aloud to the public, to clients, or to prospects.

CFA Institute membership

How a charterholder may use the designation is set by the CFA Institute Membership Agreement and by applicable law. A “CFA Institute member” is a regular or affiliate member who satisfies the membership requirements laid out in the Bylaws. Those requirements have to be met every year, and they are to complete a Membership Agreement, submit a Professional Conduct Statement that renews the pledge to follow the Code and Standards and the Professional Conduct Program, and pay the applicable dues.

If any requirement goes unmet, the person is no longer a member. Until membership is restored, that person must not present as a member and must strip references to membership from social media profiles, business communications, reports, and anywhere else it appears. A former member may still say truthfully that he or she once held membership, or name the years during which the requirements were met.

Using the CFA designation

CFA Institute encourages charterholders to use the designation, though they must state their status accurately and avoid overstating what the charter provides. An accurate explanation of the requirements met to earn the right to use it may accompany the reference. Charterholders are those who have gained the right to use the designation, and once that right is granted they must keep satisfying the annual membership requirements to retain it.

A charterholder who fails a membership requirement forfeits the right to use the designation. Until membership is re-established, that person must not present as a charterholder and must remove all references to the designation from profiles, business communications, reports, and elsewhere, though he or she may still state having been a charterholder in the past. On social media, where people can post anonymously, a pseudonym or profile name created to hide the member’s identity must never be tagged with the CFA designation.

A note on retired status

Stepping away from the profession does not automatically preserve the letters. If a charterholder stops filing the Professional Conduct Statement and stops paying dues, membership lapses and the right to use the designation is lost, even on a plain personal card with no firm logo. CFA Institute does, however, have a process to reclassify a member as retired, with reduced dues. A person who wants retired status must apply for it and meet the requirements CFA Institute sets, rather than simply continuing to use the designation.

Referring to candidacy

Candidates may refer to their candidacy, but the reference must make clear that the person is a candidate for the designation. A person counts as a candidate when two conditions hold: CFA Institute has accepted the application, shown by a notice of acceptance, and the person has enrolled to sit a specified exam, or has already sat one but is still awaiting results. Someone who declines to sit for an exam they enrolled in stops being a candidate until enrolling again for a future exam, at which point candidacy resumes.

Candidates must never state or imply a partial designation from passing one or more levels, unless CFA Institute specifically permits it. They also must not cite an expected date for earning the charter, because the charter is awarded only after every requirement is met and the CFA Institute Board of Governors grants approval. Passing each level in consecutive sittings and saying so is fine, since it is a statement of fact. The moment a candidate turns that record into a claim of superior ability, however, the statement violates Standard VII(B).

Proper and improper references to the designation

Proper reference	Improper reference
Earning the charter deepened my portfolio management skills.	Charterholders deliver better investment results.
John Smith passed all three exams in consecutive sittings.	John Smith is among an elite few, having cleared all three exams in a row.
The CFA designation is recognized worldwide and reflects completion of a demanding program in investment analysis and management.	As a charterholder, I am the most qualified person to manage your money.
The credibility of the designation and the skills the program builds support my career.	As a charterholder, Jane White offers unmatched value on trade execution.
I became a candidate to pursue the leading credential in investment management.	Enrolling as a candidate guarantees you will become better at valuing bonds.
I passed the Level II exam.	CFA, Level II
I am a 20XX Level III candidate for the CFA designation.	CFA, Expected 20XX
I passed all three levels and will be eligible for the charter once I complete the required work experience.	John Smith, Charter Pending

Compliance practices

To keep references consistent, members and candidates should circulate written guidance on Standard VII(B) to the legal, compliance, public relations, and marketing teams at their firms. Where firm materials mention an employee’s link to CFA Institute, they should press their firms to build standard templates that follow the standard, so that references to membership, the designation, and candidacy come out accurate and uniform across the organization.

Example 5 · Worked

Zonder writes and runs an ad promoting her firm, AZ Investment Advisers. The ad states that every principal is a CFA charterholder and that all of them cleared the three exams on the first try. It then prominently ties that fact to the strong performance of the firm’s mutual funds.

1. What is permitted here, and what is not?

Solution. Stating truthfully that the principals passed on the first try is acceptable on its own. The problem is linking that record to fund performance and implying that charterholders, or first-time passers, produce better results. That asserts superior ability tied to the designation, which violates Standard VII(B).

Example 6 · Worked

Five years after earning his charter, Vasseur resigns and travels for two years. During that time he neither files a Professional Conduct Statement nor pays his dues, so his CFA Institute membership lapses. He then sets up as an independent contractor and prints business cards showing “CFA” after his name, without reinstating his membership.

1. Has Vasseur violated the standard?

Solution. Yes. Once membership lapses, he loses the right to use the designation, so presenting himself as a charterholder misrepresents his status and violates Standard VII(B). To use the letters again, he must complete the reinstatement process and meet the requirements CFA Institute sets.

Example 7 · Worked

Glass, a quantitative analyst, wants to post a comment on an investor blog using information drawn from his work, which he believes will help investors. He prefers not to reveal who he is, so he signs the comment “Expert, CFA.”

1. Is this acceptable?

Solution. No. Hiding his identity behind a made-up name while still claiming the designation misuses the CFA marks and misrepresents his identity, breaching Standard VII(B). A pseudonym or anonymous profile must not carry the CFA designation.

Check yourself

Two candidates registered for Level III promote their new advisory firm. One prints a business card reading “CFA Level II.” The other states in promotional material that he participates in the CFA Program and has finished Levels I and II. Who, if anyone, has violated the standard?

The first candidate has violated Standard VII(B), because “CFA Level II” implies a partial designation that does not exist. The second has not: a candidate may say he is participating in the program and may state the levels he has completed, since those are statements of fact.

A charterholder retires and wants a lower dues rate while keeping the letters. What must she actually do?

She must apply for retired status through the CFA Institute process and meet its requirements. Simply stopping her Professional Conduct Statement and dues would let membership lapse, which would cost her the right to use the designation.

End of lesson.

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