An analyst covering a mining company concludes the stock is overpriced, then learns his firm just pitched to underwrite the company's debt offering. Standard I decides what he writes next.
Standard I: Professionalism contains five sub-standards that govern how you behave as a practitioner, before any client-specific duty attaches. All five apply to Members and Candidates alike.
You must understand and comply with all applicable laws, rules, and regulations governing your professional activities, including the Code and Standards themselves. Where they conflict, follow the more strict rule. You must not knowingly participate or assist in a violation, and you must dissociate from one.
Two definitions do most of the exam work. Applicable law is the law that actually governs your conduct given the facts. The more strict rule is the one imposing greater restriction on you or demanding greater action to protect clients. Referral-fee disclosure is the classic case: local law may be silent, but the Code requires disclosure, so you disclose.
Common mistakes
- Following home-country law reflexively. Candidates apply the employer's or citizen's law. Ask which law governs the conduct at that location, then compare it with the Code.
- Treating "no local law" as no duty. With no applicable regulation, the Code and Standards bind fully, including insider-trading restrictions.
- Resigning first. Dissociation is the last step, not the first. Raise it internally, then remove yourself; documentation is required.
Bottom line
- Five sub-standards: Knowledge of the Law, Independence and Objectivity, Misrepresentation, Misconduct, Competence
- Conflict rule: follow the more strict of applicable law or the Code; no local law means the Code governs
- More strict: greater restriction on you or greater action required to protect clients
- Dissociation order: discuss, escalate to supervisor or compliance, then step away and document
Exam shortcut
Read the stem for the location of the conduct, not the passport. Then run one comparison: applicable law versus Code, pick the harsher, and eliminate any choice that lets the candidate follow the softer rule. If the vignette says "no securities regulation exists," the answer is always the Code.
The full lesson (about 2,045 words, 14 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- standard I professionalism
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