CFA Code of Ethics

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

In this lesson, we'll talk about the Code of Ethics as set out by the Chartered Financial Analyst (CFA) Institute. You'll learn how this Code of Ethics is designed to help investors invest in a way that will benefit society as a whole instead of harming it.

Code of Ethics

The Chartered Financial Analyst or CFA Code of Ethics provides the benchmark for professional investors worldwide that encourages investing practices with a focus on helping society instead of harming it through ulterior motives. The Code of Ethics is set forth by the CFA Institute. This Code prevents investors from creating another financial crisis like what happened in 2008 when lender and after lender would go into bankruptcy. This essentially froze up the economy of not just the U.S., but of other countries as well.

The CFA Institute

The Chartered Financial Analyst Institute offers the CFA Program and the Claritas Program that investment managers can participate in and earn a designation that shows they understand the importance of ethical investing. The programs have different levels that investment managers can choose from which to qualify. The Claritas Program, the most basic, only takes six months. While the highest CFA Program, earning you a CFA charter, takes four years. Each program has tests that you must pass before passing and earning your designation. Having the CFA designation is actually beneficial for your company.


The CFA Institute's Code of Ethics has six major components as paraphrased below:

1. Investment managers must use honesty, act with morality; successfully, efficiently, carefully and persistently work with respect and in an ethical manner on behalf of clients and others they encounter in their work. Essentially, a CFA investment manager vows not to cheat a client and divert a part of their profit into his bank account.

2. Investment managers must place the integrity of the profession and the interests of their clients above any personal interests. That is, CFA investment managers vow to work in the client's best interests instead of their own.

3. Investment managers must also use care and independent judgment when performing analysis, making recommendations, and otherwise performing a professional investment managing activity. For example, a CFA investment manager won't make a recommendation just because his friend told him so. Instead, he will have performed sufficient research and have the necessary backup to show that the recommendation is a good one.

4. Investment managers must themselves practice and encourage others to act in professional ethical ways that will reflect well on the investment profession. Collaboratively, a CFA investment manager will encourage other investment managers to also give their clients first priority and perform investment activities in an honest and ethical manner.

5. Investment managers must encourage the honesty and favorable conditions of worldwide capital markets for the greater good. For example, CFA investment managers won't do something to profit themselves while bringing the worldwide stock market down.

6. Investment managers must continually improve their professional competence and encourage that same level of competence in others in the field.

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