Case Studies in the Code and Standards

By now, having passed the CFA Level I and II exams, you are quite familiar with the Code and Standards. Why do you think the CFA Institute presents still more discussion of the Code and Standards at Level III?

Yes.

While that answer may have some merit, it is not the primary reason.

Why do you think that deciding on a real action is the hardest part of any ethical dilemma?

Yes. In fact, all of these answers have a lot of merit. It's harder to make a decision when the consequences are greater. And you know that emotional and cognitive biases affect decision-making, whether it's about an asset allocation or an ethical dilemma. So, being trained as a financial analyst, and given cognitive and emotional biases, what do you think should be your first approach to resolving an ethical decision?

This may be tempting, but it would reflect biases more than anything.

This is useful, but not as a first step.

Right!

Analysts look for or devise an analytical model that can be applied to guide the decision-making process. The framework for making ethical decisions is akin to many decision frameworks or models that are used by analysts, and it relies on three large steps: identify, consider, and act. What do you think would be useful to identify in making an ethical decision?

Once you have considered any further guidance and alternative actions and taken a hard look at what conflicts may involve you to the point of affecting your own judgment, you can make—perhaps—a better decision and act on it. And then you're done, right?

In sum: [[summary]]

The earlier exams have tested your knowledge of the Code and Standards by testing your ability to recognize violations. The Level III exam is all about judgment and interpretation as applied to day-to-day work in the profession. And we've all been there. It's a lot easier to recognize an ethical decision than to make one. It's a lot easier to recognize a violation of the Code and Standards than to successfully correct it, especially when your job or even your career may be on the line.

Right. In fact, all of these are important factors to identify in analyzing the situation. It seems obvious that the facts of the situation need to be known, but it is sometimes difficult to have complete facts, so it is good to methodically check your facts. The Code and Standards should have impressed upon you by now that as a financial analyst you have a duty: to clients, to employers, and to the profession. You need to be able to recognize what those duties are under the circumstances. If you have conflicting duties, you need to know that too so that you can think about how to prioritize them. Then, you want to look to the Standards for guidance on how to proceed.

Not quite.

Correct.

The last step in the framework is to review and reflect upon the consequences of your decision and its actions. After all, there's probably another ethical decision somewhere in your future.

To be able to say that CFA charterholders are leaders in the industry

To explore the use of judgment and interpretation in actual applications

Actions have more consequences than just thoughts.

Emotional biases can disrupt rational decision-making.

Ethical decision-making is a learned skill, not an innate sense.

Get data

Use a model

Go with your instincts

What conflicts exist

The facts of the situation

What Standards may apply

Who is affected, and to whom a duty is owed

Yes

No

Continue

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