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Explain how CFA Institute polices the Code and Standards through its Professional Conduct Program

CFA® Level I · Ethical and Professional Standards · Code of Ethics and Standards of Professional Conduct · ET.1.c

The idea

CFA Institute enforces the Code and Standards through its Professional Conduct Program, which applies to members and candidates. Inquiries can be prompted by a complaint, by information in the media or other public sources, by a member's or candidate's own disclosures, including the annual Professional Conduct Statement, or by reports of conduct during an examination. Professional Conduct staff investigate and, once the inquiry is complete, may take no action, issue a cautionary letter where conduct warrants attention but not discipline, or propose a disciplinary sanction. Sanctions include public censure, suspension of membership and of the right to use the CFA designation, revocation of membership or of the right to use the designation, and, for candidates, suspension or prohibition from further participation in the CFA Program. A member or candidate may accept a proposed sanction or reject it, in which case the matter goes to a hearing before a panel. Enforcement is separate from any legal or regulatory proceeding.

A practice question

From the question bank, with the reason each wrong option is wrong.

Which of the following can prompt an inquiry by CFA Institute Professional Conduct staff?

  1. A complaint or a media report — correct
  2. Only a criminal convictionWhy not: Inquiries can begin on many kinds of information, not solely convictions.
  3. Only a request from an employerWhy not: Complaints can come from anyone, and staff also act on public information.

Inquiries can be triggered by complaints, public information such as media reports, a member's own disclosures or examination reports.

A harder one

Which of the following is a disciplinary sanction CFA Institute may impose?

  1. Cancelling the member's securities licenceWhy not: Licences are granted and withdrawn by regulators, not by CFA Institute.
  2. Bringing criminal charges against the memberWhy not: CFA Institute is a professional body and cannot prosecute anyone.
  3. Revoking the right to use the designation — correct

Sanctions available include censure, suspension and revocation of membership or of the right to use the CFA designation.

The hardest tier

An analyst argues that because no regulator has acted against her, CFA Institute cannot sanction her for the same conduct. Is she correct?

  1. Yes, a regulator must act firstWhy not: The Program does not depend on any regulatory or legal proceeding.
  2. No, enforcement is separate from the law — correct
  3. Yes, unless a client has sued herWhy not: A lawsuit is not a precondition; staff can act on other information.

The Professional Conduct Program enforces the Code and Standards independently. Conduct can breach them without any regulator acting, and sanctions do not await legal action.

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