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Standard I — Professionalism

In this chapter: I(A) Knowledge of the Law · I(B) Independence and Objectivity · I(C) Misrepresentation · I(D) Misconduct

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Standard I governs professional conduct: comply with applicable law, maintain independence, don't misrepresent, avoid misconduct. These four sub-standards establish baseline professionalism.

Foundation

I(A) Knowledge of the Law: comply with the most strict applicable law. If local law and CFA differ, follow stricter. Don't knowingly violate. I(B) Independence and Objectivity: accept no inducements that compromise judgement. Modest meals/entertainment OK; significant gifts must be declined or disclosed. I(C) Misrepresentation: no false statements about qualifications, performance, or material facts. I(D) Misconduct: no fraud, deceit, or behaviour that compromises professional reputation.

Deep Dive

Practical applications: I(A): Indian context — SEBI rules sometimes stricter than CFA. Follow stricter. Insider trading = stricter under SEBI Insider Trading Regulations 2015 than CFA Standard II(A). I(B): research analysts must declare gifts; investment professionals must declare relationships affecting analysis. I(C): performance presentations must be accurate; "past returns indicative of future" disclaimers required (mandatory under SEBI MF advertising rules). I(D): includes plagiarism, fraud, misappropriation. Even non-business-related serious misconduct (DUI, etc.) can violate.

Advanced

Subtle exam point on I(A): if you don't know applicable law, are you violating? Yes — Standard requires reasonable diligence in knowing rules. Active practice in India: stay current with SEBI, IRDAI, AMFI updates. Independence violations from gifts: courts and CFA Institute use "reasonable person" standard. Would a third party think gift influenced judgement? If yes: violation. Misconduct beyond business: criminal records affect CFA standing. Securities fraud: automatic violation. Other crimes: case-by-case.

Regulatory references
  • CFA Standards Handbook I(A)-(D)
  • SEBI Research Analyst Regulations 2014
  • SEBI Insider Trading Regulations 2015
Common mistakes & pitfalls
  • Accepting gifts above reasonable amount.
  • Not disclosing client/firm relationships.
  • Inflating qualifications on resume.
  • Treating misconduct outside business as "personal" only.

Frequently asked

What's a reasonable gift threshold?
CFA doesn't specify; "modest" by reasonable-person standard. Typically: meal $50-100; gift $100-200. Larger requires disclosure + firm policy compliance.
Does I(A) require knowing every law?
No, reasonable diligence to know applicable laws in your practice. Stay current via training, regulatory updates, professional consultation.

Practice questions

Click each question to reveal the answer and explanation.

Q 1
A CFA member receives gift exceeding firm policy. Should:
  1. (a)Accept silently
  2. (b)Decline OR disclose and seek approval
  3. (c)Refuse to do business
  4. (d)Leave the firm
Correct: (b) Decline OR disclose and seek approval
Decline OR disclose + seek approval. Don't accept secretly. Document the situation.
Q 2
I(A) Knowledge of Law requires:
  1. (a)Knowing all laws globally
  2. (b)Reasonable diligence on applicable laws + complying with stricter of conflicting laws
  3. (c)Only stocks-related law
  4. (d)Hiring lawyer
Correct: (b) Reasonable diligence on applicable laws + complying with stricter of conflicting laws
Reasonable diligence + comply with stricter when laws conflict. Active duty to stay current.
Q 3
Misrepresentation includes:
  1. (a)Inflating qualifications
  2. (b)Promising returns
  3. (c)Plagiarising research
  4. (d)All of the above
Correct: (d) All of the above
All three are misrepresentation. Standard I(C) covers any false/misleading material statement.
Q 4
Independence is compromised when:
  1. (a)Receive modest meal
  2. (b)Receive significant gift that could affect judgement
  3. (c)Have other clients
  4. (d)Work in same office as competitor
Correct: (b) Receive significant gift that could affect judgement
Significant gifts compromise independence. Modest meals usually acceptable. Other clients/competitors in same office: not automatic violation.
Q 5
Standard I(D) Misconduct includes:
  1. (a)Only business fraud
  2. (b)Any conduct compromising professional reputation, including non-business serious crimes
  3. (c)Tax issues only
  4. (d)Dress-code violations
Correct: (b) Any conduct compromising professional reputation, including non-business serious crimes
I(D) is broad: any serious misconduct affecting professional reputation. Includes business and personal serious actions.
Educational purposes only. The numbers, returns, and examples used in this lesson are illustrative. Past performance does not guarantee future results. Mutual fund and securities investments are subject to market risks. This lesson is not investment advice; for advice tailored to your circumstances, consult a SEBI-registered Investment Adviser. Read our full disclaimer.