Ethical and Professional Standards Flashcards
•••••••Ethical•••••••
I. Professionalism
I(A). Knowledge of the Law.
Understand and comply with (i) laws, (ii) rules, (iii) regulations, and (iv) Code and Standards and follow the more strict
•••••••Ethical•••••••
I. Professionalism
I(B). Independence and Objectivity.
- Do not offer, solicit, or accept any gift, benefit, or compensation that would compromise independence and objectivity.
•••••••Ethical•••••••
I. Professionalism
I(C). Misrepresentation.
o Do not misrepresent facts regarding investment analysis, recommendations, actions, or other professional activities.
•••••••Ethical•••••••
I. Professionalism
I(D). Misconduct.
o Do not engage in any professional conduct that involves dishonesty, fraud, or deceit.
o Do not do anything that reflects poorly on your integrity, good reputation, trustworthiness, or professional competence.
- Overprice a reimbursement or drink at work
•••••••Ethical•••••••
II. Integrity of Capital Markets
II(A). Material Nonpublic Information.
o Do not act on material nonpublic information or induce someone else to act.
•••••••Ethical•••••••
II. Integrity of Capital Markets
II(B). Market Manipulation.
o Do not engage in practices intended to mislead market participants through distorted prices or inflated trading volume.
•••••••Ethical•••••••
III. Duties to Clients and Prospective Clients
III(A). Loyalty, Prudence, and Care.
o Always act for the benefit of clients = Client’s Interest > Employee > Own
•••••••Ethical•••••••
III. Duties to Clients and Prospective Clients
III(B). Fair Dealing.
o Members must deal fairly and objectively with all clients and prospects.
•••••••Ethical•••••••
III. Duties to Clients and Prospective Clients
III(C). Suitability
o Understand the client’s investment experience, risk and return objectives, and constraints prior to any recommendations or investment action. Establish a written IPS. Reassess information and update regularly (annually).
o Make sure investments are suitable in the context of a client’s total portfolio.
•••••••Ethical•••••••
III. Duties to Clients and Prospective Clients
III(D). Performance Presentation.
o Presentations of investment performance information must be fair, accurate, and complete.
•••••••Ethical•••••••
III. Duties to Clients and Prospective Clients
III(E). Preservation of Confidentiality.
o All information about current, former and prospects clients must be kept confidential unless it pertains to illegal activities and disclosure is required by law, or the client or prospect gives permission for the information to be disclosed.
•••••••Ethical•••••••
IV. Duties to Employers
IV(A). Loyalty.
o Employee’s interest > own. Do not deprive employer of skills and abilities, divulge confidential info or do any harm
•••••••Ethical•••••••
IV. Duties to Employers
IV(B). Additional Compensation Arrangements.
o Accept no gifts, benefits, compensation, or consideration that may create a conflict of interest with the employer’s interest unless written consent is received from all parties (includes e-mail).
•••••••Ethical•••••••
IV. Duties to Employers
IV(C). Responsibilities of Supervisors.
o Make reasonable efforts to ensure that anyone subject to their supervision complies with applicable laws, rules, regulations, and the Code and Standards; as well as make reasonable efforts to detect violations.
•••••••Ethical•••••••
V. Investment Analysis, Recommendations, and Action
V(A). Diligence and Reasonable Basis
o Use diligence, independence, and thoroughness | Have adequate basis, supported by research and investigation.
•••••••Ethical•••••••
V. Investment Analysis, Recommendations, and Action
V(B). Communication with Clients and Prospective Clients
o Disclose to clients and prospective clients the investment processes they use to analyze investments, select securities, and construct portfolios. Also disclose significant limitations and risks associated with the investment process.
o Distinguish between fact and opinion in the presentation of investment analysis and recommendations.
•••••••Ethical•••••••
V. Investment Analysis, Recommendations, and Action
V(C). Record Retention.
o Maintain all records supporting analysis, recommendations, actions, and all investment-related communications
•••••••Ethical•••••••
VI. Conflicts of Interest
VI(A). Disclosure of Conflicts.
o Make full and fair disclosure of all matters that may impair independence or objectivity
o Disclosures must be prominent, in plain language, and effectively communicate the information.
•••••••Ethical•••••••
VI. Conflicts of Interest
VI(B). Priority of Transactions.
o Investment transactions for clients and employers must have priority over those in which a Member is a beneficial.
•••••••Ethical•••••••
VI. Conflicts of Interest
VI(C). Referral Fees.
o Disclose to employers, clients, and prospects any benefit received or paid for recommendations of products and services.
•••••••Ethical•••••••
VII. Responsibilities as a CFA Institute Member or CFA Candidate
VII(A). Conduct as Members and Candidates in the CFA Program.
o Do not engage in any conduct that compromises the reputation or integrity of CFA Institute
o Members and Candidates are not precluded from expressing their opinions regarding the exam program or CFA Institute.
•••••••Ethical•••••••
VII. Responsibilities as a CFA Institute Member or CFA Candidate
VII(B). Reference to CFA Institute, the CFA designation, and the CFA Program.
o Do not misrepresent or exaggerate the meaning or implications of membership in CFA Institute
