17.3 Standards of Professional Conduct

The Standards of Professional Conduct are the enforceable layer under the six Code principles. CMT Level I tests them at definition and vignette depth. Read every "CFA Institute / member / candidate / CFA Program" line as the CMT Association equivalent. The current licensed document (effective 1 January 2024, Handbook 12th edition) is what the Association hosts for members. Independent OpenExamPrep teaching walks those clusters with technician facts; it is not CMT Association or CFA Institute approval. Independent practice is at /practice/cmt.

I. Professionalism

I(A) Knowledge of the Law. Understand and comply with applicable laws, rules, and regulations, including the Code and Standards. If they conflict, comply with the more strict law, rule, or regulation. Do not knowingly participate or assist in a violation, and dissociate from it.

Technician vignette. A local marketing rule forbids live trade recommendations on public social media without a prescribed disclaimer. The Code does not list that disclaimer. You still follow the stricter local rule. If a teammate keeps posting naked "buy the breakout now" calls that violate that rule, you dissociate: you do not co-author the thread, and you escalate.

I(B) Independence and Objectivity. Use reasonable care to achieve and maintain independence. Do not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could compromise your independence or someone else's.

Issuer-paid "feature this chart," a broker's lavish ticket in exchange for a bullish overlay, or a hedge fund's data feed that is conditioned on friendly coverage are independence problems. Modest token gifts are not automatically a violation; the test is whether a reasonable observer would see a compromised call.

I(C) Misrepresentation. Do not knowingly make misrepresentations relating to analysis, recommendations, actions, or other professional activities.

This is the published chart stem. Calling a simulated, cost-free backtest "live audited performance" is a misrepresentation. Copying another technician's annotated chart and presenting it as yours is a misrepresentation. "This pattern always works" is a misrepresentation. Using the CMT letters before you have the charter is both I(C) and VII(B).

I(D) Misconduct. Do not engage in professional conduct involving dishonesty, fraud, or deceit, or commit any act that reflects adversely on professional reputation, integrity, or competence. Fraudulent fills, fabricated screenshots, and lying to a client about whether a stop was in the market sit here even when no other Standard's heading feels perfect.

I(E) Competence (2024). Act with and maintain the competence necessary to fulfill your professional responsibilities. A technician who starts posting options overlays without knowing what implied volatility is has a competence problem, not merely a "new product" excuse.

II. Integrity of Capital Markets

II(A) Material Nonpublic Information (MNPI). If you possess MNPI that could affect the value of an investment, you must not act or cause others to act on it.

Material means a reasonable investor would want it. Nonpublic means it is not disseminated in a way the market can use. Overhearing a CFO confirm an unannounced plant closing at a private lunch, then posting a "classic breakdown" chart and a sell call, is causing others to act on MNPI. Your followers do not have to be advisory clients for II(A) to bite.

Public charting of public prices is not MNPI. Combining public filings with nonmaterial nonpublic color (the mosaic) is a Handbook nuance; Level I still wants you to stop when the information is both material and nonpublic.

II(B) Market Manipulation. Do not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.

Painting the tape in a thin name so a breakout screenshot looks real, circulating a rumor that a support level "will be defended by a fund" to induce buying, or washing volume to fake participation are manipulation facts. Aggressive honest trading that moves a price is not automatically II(B); intent to mislead is the exam hinge.

III. Duties to Clients

III(A) Loyalty, Prudence, and Care. Loyalty to clients; reasonable care; prudent judgment. Act for the client's benefit and place client interests before the employer's or your own.

III(B) Fair Dealing. Deal fairly and objectively with all clients when analyzing, recommending, taking action, or otherwise acting professionally. You may not tip favorite accounts first on a published setup while other clients still sit in the unfilled queue. Fair is not always identical timing in a literal millisecond sense; it is not a VIP first look.

III(C) Suitability. In an advisory relationship, inquire into experience, risk and return objectives, and constraints; reassess; recommend only what fits the client's situation and written mandate; judge suitability in the total portfolio. If you manage to a stated strategy, do only what that mandate allows. A high-beta breakout engine is not suitable for a capital-preservation account just because the chart is pretty.

III(D) Performance Presentation. When communicating performance, make reasonable efforts to ensure it is fair, accurate, and complete.

Cherry-picking is the classic technician fail: a newsletter that shows only the five chart calls that gained more than 20% and omits losers, untriggered setups, and costs. A composite that drops stopped-out names from the track record is the same Standard. Completeness does not mean dumping every tick file into a tweet; it means the presentation is not a rigged sample.

III(E) Preservation of Confidentiality. Keep current, former, and prospective client information confidential unless (1) the information concerns illegal activities, (2) disclosure is required by law, or (3) the client permits disclosure. A fun social-media recap that names a client's concentrated position is a confidentiality breach even if the chart is "educational."

IV. Duties to Employers

IV(A) Loyalty. In employment matters, act for the employer's benefit. Do not deprive the employer of your skills, divulge confidential information, or otherwise cause harm. Walking out with the firm's point-in-time database, signal code, or unpublished client list is an IV(A) problem. Preparing a personal website on your own time with public charts is usually not; taking the firm's proprietary model is.

IV(B) Additional Compensation Arrangements. Do not accept gifts, benefits, compensation, or consideration that competes with or might reasonably conflict with the employer's interest unless you obtain written consent from all parties involved.

IV(C) Responsibilities of Supervisors. Make reasonable efforts to ensure that anyone subject to your supervision complies with laws, rules, regulations, and the Code and Standards. "I never read the intern's Twitter" is a weak supervisor story if the intern is posting live client calls.

V. Investment Analysis, Recommendations, and Actions

V(A) Diligence and Reasonable Basis. Exercise diligence, independence, and thoroughness. Have a reasonable and adequate basis, supported by appropriate research, for analysis, recommendations, and actions.

A social-media buy from one candle with no universe, no invalidation, and no check for a halt is a V(A) fail. So is shipping a client a measured-move target from an unadjusted split cliff.

V(B) Communication with Clients and Prospective Clients. Disclose the nature of services and costs; disclose the basic format and general principles of the investment process, and promptly disclose material changes; disclose significant limitations and risks; use reasonable judgment about which factors matter and include them; distinguish fact from opinion.

On a published chart: the neckline break is a fact (price did that). "This will fall 18% because head-and-shoulders always complete" is opinion, and often a misrepresentation if you state it as fact. Process disclosure includes "this is a 20-day breakout system with a 1% equity stop," not a mysterious "proprietary oscillator."

V(C) Record Retention. Develop and maintain appropriate records to support analyses, recommendations, actions, and investment-related communications.

If you published the chart, keep the chart, the data vintage, the corporate-action policy, and the note that distinguished fact from opinion. "The platform rolled the file off" is not a records policy.

VI. Conflicts of Interest

VI(A) Avoid or Disclose Conflicts (2024 heading). Avoid or make full and fair disclosure of matters that could reasonably impair independence or interfere with duties to clients, prospects, or employer. Disclosures must be prominent, in plain language, and effective. Holding a personal long while pumping the same breakout to clients is a conflict. Avoiding it (no personal fill, or no client call) is better than a footnote in 6-point type.

VI(B) Priority of Transactions. Investment transactions for clients and employers must have priority over transactions in which you are the beneficial owner.

Front-running a client is the exam picture: you manage a client account and a personal account; before entering the client's buy from a published breakout list, you fill yourself in the same thin stock. Client and firm trades come first. Personal trades wait. A pre-clearance policy is how many shops operationalize this; the Standard is the priority, not the software vendor.

VI(C) Referral Fees. Disclose to employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for recommending products or services. A data vendor that pays you for every signup from your chart blog is a referral-fee fact, even if you "really like the software."

VII. Responsibilities as a CMT Association member or candidate

VII(A) Conduct as participants in CMT Association programs. Do not engage in conduct that compromises the reputation or integrity of the CMT Association or the CMT designation, or the integrity, validity, or security of Association programs.

Sharing live exam content, photographing a Prometric item, or circulating a "brain dump" of Level I stems is a VII(A) explosion. So is lying on a Professional Conduct statement. The Association's program security is not a game.

VII(B) Reference to the Association, the CMT designation, and the CMT Program. Do not misrepresent or exaggerate the meaning of membership, of holding the designation, or of candidacy.

You may state that you are a CMT Level I candidate if that is true. You may not use CMT after your name, imply that candidacy is the charter, or suggest the Association endorses your newsletter. Passing Level I does not let you say you are a Chartered Market Technician. Trademark rules for charterholders are on the Association site; Level I's exam job is no exaggeration.

Four technician stems to rehearse

Publishing a chart. Distinguish fact from opinion (V(B)), keep records (V(C)), do not call a backtest live performance (I(C), III(D)), disclose a personal holding (VI(A)), and do not use CMT letters you have not earned (VII(B)).

Social-media calls. Diligence and basis (V(A)); no MNPI (II(A)); no rumor-pumps (II(B)); fair dealing if the audience includes clients (III(B)); local marketing law if it is stricter (I(A)).

Front-running a client. Priority of transactions (VI(B)) plus the Code's client-first principle. A personal fill in a thin name that moves the offer against the client is also a loyalty problem (III(A)).

Cherry-picking performance. Fair, accurate, complete presentation (III(D)); often misrepresentation (I(C)); encouraging others not to do it is a Code principle. Dropping losers from a composite is not "cleaning outliers."

Exam habits for this unit

Name the cluster before you name the sub-letter if the stem is messy. Ask who the client is, whether information is material and nonpublic, whether the sample of results is complete, and whether a personal trade jumped the queue. When local law and the Code conflict, the more strict rule wins. When a stem offers "OpenExamPrep approval" or "CMT Association partnership" as a comfort, reject it.

Key Takeaways

• Seven clusters: professionalism, markets, clients, employers, analysis, conflicts, CMT member/candidate duties
• More strict law wins; independence; no misrepresentation or misconduct
• No MNPI trading or causing others to trade; no intent-to-mislead manipulation
• Fair complete performance; client/employer trades before yours; keep chart records
• No exam dumps; no CMT letters before the charter; no cherry-picked newsletter as "the track record"