It’s common knowledge: CFA Institute puts emphasis on Ethics. What it means is that your Ethics score may effectively influence your final CFA exam result. And it’s true for every exam level.
What Is CFA Ethics Adjustment?
Ethics adjustment may have either a positive or a negative impact on your exam: it makes you either PASS or FAIL if your total exam score borders the minimum passing score (MPS) set for your exam.
if your total score is slightly below the MPS
high score in Ethics may cause you PASS the exam
if your total score is slightly above the MPS
low score in Ethics may cause you FAIL the exam
What if we tried to use a more practical measure to illustrate the problem?
but let’s assume that the MPS set for an exam is 69%. As a rule, you pass if you reach the MPS and fail if not. However, your Ethics score is in a position to adjust the rule. How? Take a look:
Assume you’re a CFA level 1 candidate. There are 240 questions in the level 1 exam. We know that all questions are given equal importance. If each question is scored 1 point, we get the total of 240 points. MPS of 69% gives exactly 165,6 points. However, there are no half points in the exam because you either get a question wrong or right.
To illustrate the Ethics adjustment, we assume you scored either 165 or 166 points in your exam:
165 points you’re below the MPS
but if your Ethics performance is strong you may still PASS
166 points you’re above the MPS
but if your Ethics performance is weak you may still FAIL
If you happen to be a borderline candidate, Ethics adjustment works either in your favor or against you. Having this knowledge you can deliberately decide how to go about Ethics during your CFA exam prep. . That’s why in our CFA Study Planner we encourage you to begin and end your preparation with Ethics. To make sure it sinks in, you'll also have short review of ethical standards arranged in between other topics. Deal with Ethics our way (as scheduled inside your FREE study plan ) and score high in your exam Ethics questions!
Top Secrets That Make A Difference
CFA Institute never:
discloses the exact MPS set for a given exam or how it is established,
releases any specific information on the Ethics adjustment:
neither the Ethics score required for the adjustment to be applied,
nor to whom it is applied,
nor how it exactly works.
You will never know if you were a borderline candidate or not, but it’s better to act as if you could be one. The net result is that the Ethics adjustment has had a positive effect on candidates’ scores (and exam pass rates) ever since it was introduced.
How CFA Level 2 Ethics Differs
(CFA level 1 and level 2 ethics compared)
CFA level 2 ethics is not that much different from CFA level 1 ethics.
First of all, the ethics adjustment still applies (note: it also holds on level 3). Even though the case we used to illustrate the issue was based on the CFA level 1 exam, we could have just as well used the CFA level 2 exam to make our point. Ethics in your level 2 exam is simply as important as it was in your level 1 exam and it has the power to decide about your PASS or FAIL in borderline situations.
Secondly, it’s still the same CFA Institute Code of Ethics and Standards of Professional Conduct you study during your level 1 prep. OK. The GIPS Standards are required only in your level 1 exam… But other than that you still need to know the same Code and Standards pretty well to gain points for Ethics in your CFA level 2 exam. This time, however, exam questions are made into item sets.
For the level 1 exam, ethics is tested through multiple choice questions preceded by short cases featuring usually one or two fictitious CFA charterholders or CFA candidates. For the level 2 exam, the case description (vignette) is simply a bit longer and for one case (vignette) – you’ll have 4-6 multiple choice questions instead of one. What it means in practice is that a case may feature more than one or two characters and the questions will ask about the professional conduct of these characters.
To conclude, Ethics is among the top 3 most important topics at each level of CFA exam. CFA exam weight for Ethical and Professional Standards is 15% for level 1, 10-15% for level 2, and 10-15% for level 3.
- ethics adjustment applies,
- you are tested on the CFA Institute Code of Ethics and Standards of Professional Conduct (GIPS included),
- CFA exam questions are multiple choice questions,
- CFA level 1 ethics questions: Usually a short description (case) featuring one or two CFA charterholders or CFA candidates. Questions ask about the professional conduct of these people.
- CFA level 1 exam weight for Ethics: 15%, which makes it the most important topic alongside FRA!
- ethics adjustment still applies,
- you are still tested on the same CFA Institute Code of Ethics and Standards of Professional Conduct you study during your level 1 prep (only GIPS are excluded),
- CFA exam questions are made into item sets,
- item sets: the case description (vignette) is a bit longer than in the level 1 exam and for one case (vignette) – you’ll have 4-6 multiple choice questions instead of one (questions may ask about the professional conduct of more than one or two CFA charterholders or CFA candidates),
- CFA level 2 exam weight for Ethics: 10-15%, which makes it one of the most important topics!
Both CFA ethics adjustment and the topic weights tell us one thing: Ethics is not like any other CFA topic.
Ethics is really important, both in your CFA exam and at work.
This is why regular revision of the CFA Code and Standards is highly recommended. Sadly, CFA candidates tend to neglect it. To help you change that, we compiled a roughly 120-page summary of Ethics for quick revision (includes the most important ethical concepts CFA candidates of all levels are required to know plus numerous short examples for guidance and practice):
The best way to study ethics is first to read the CFA Code and Standards in your curriculum and then to review each Standard separately. Schedule these separate Standard revisions all throughout your exam prep in between other topics (that’s what we do in this free CFA study planner). Finally – in the last month before the exam – review the whole Code and Standards again. You can even read the most important parts once more.