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2016 CFA Schweser > Book 1 L 1: Ethics _ GIPS > Flashcards

Book 1 L 1: Ethics _ GIPS Flashcards

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1
Q

CFA Institute Professional Conduct Program

A
  • Covered by the CFA Institute Bylaws and the Rules of Procedure for Proceedings Related to Professional Conduct.
  • Based on the principles of fairness of the process to members and candidates and maintaining the confidentiality of the proceedings.
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2
Q

The Disciplinary Review Committee of the CFA Institute Board of Governors

A

Has overall responsibility for the Professional Conduct Proram and enforcement of the Code of Standards.

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3
Q

The CFA Institute Professional Conduct Staff

A

Conducts inquiries related to professional conduct.

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4
Q

Circumstances that can prompt an inquiry by the CFA Institute Professional Conduct Staff.

A
  1. Self-disclosure
  2. Written complaints about a member or candidate
  3. Evidence of misconduct received throuh public sources (media / broadcast)
  4. A report by a CFA exam proctor
  5. Analysis of exam materials and monitoring of social media by CFA Institute
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5
Q

Once an inuquiry has begun, the Professional Conduct Staff may:

A

Request (in writing) an explation from the subject member or candidate and may:

  1. Interview the member or candidate
  2. Interview the camplainant or other third party
  3. Collect documentation and recrods relevant tot he investigation.
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6
Q

After an investigation into an inquiry,

the Professional Conduct Staff may decide to:

A
  1. That no disciplinary sanctions are appropriate
  2. To issue a cautionary letter
  3. To discipline the member or candidate
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7
Q

If a disciplinary sanction is proposed by a the Professional Conduct Staff the member or candidate may

A
  • Accept or reject tehe sanction
  • If they reject the sanction, the matter will be referred to a disciplinary review panel of CFA Institute members for a hearing.
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8
Q

What may Disciplinary Sanctions include?

A
  • Condemnation by the members’ peers
  • Suspension of candidates continued participation in the CFA program
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9
Q

CFA Code of Ethics

A
  • Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession and other participants in the global capital markets.
  • Place the integrity of the investment profession and the interests of clients above their own personal interests.
  • Use reasonable care and exercise independent professional judgement when conducting investment analysis, making investment recommendations, taking investment actions and engaging in other professional activities.
  • Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
  • Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
  • Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
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10
Q

Code of Ethics

A
  • Act with integrity, competence, diligence, respect and in an ethical manner (with everyone)
  • Place the integrity of the investment profession and the needs of clients above their own.
  • Use reasonable care and exercise independent professional judgement
  • Practice and encourage others to practice in a professional and ethical manner
  • Promote the integrity and viability of the global capital markets
  • Maintain and improve professional competence (their own and others)
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11
Q

The Standards of Professional Conduct

A

I. Professionalism

II. Integrity of Capital Markets

III. Duties to Clients

IV. Duties to Employers

V. Investment Analysis, Recommendations, and Actions

VI. Conflicts of Interest

VII: Responsibilities as a CFA Institute Member or CFA Candidate

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12
Q

Standards of Professional Conduct

Professionalism

A

A. Knowledge of the Law

B. Independence and Objectivity

C. Misrepresentation

D. Misconduct

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13
Q

Standards of Professional Conduct

Integrity of Capital Markets

A

A. Material Nonpublic Information

B. Market Manipulation

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14
Q

Standards of Professional Conduct

Duties to Clients

A

A. Loyalty, Prudence and Care

B. Fair Dealing

C. Suitability

D. Performance Presentation

E. Preservation of Confidentiality

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15
Q

Standards of Professional Conduct

Duties to Employers

A

A. Loyalty

B. Additional Compensation Arrangements

C. Responsibilities of Supervisors

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16
Q

Standards of Professional Conduct

Investment Analysis, Recommendations, and Actions

A

A. Dilience and Reasonable Basis

B. Communication with Clients and Prospective Clients

C. Record Retention

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17
Q

Standards of Professional Conduct

Conflicts of Interest

A

A. Disclosure of Conflicts

B. Priority of Transactions

C. Referral Fees

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18
Q

Standards of Professional Conduct

Responsibilities As a CFA Institute Member or CFA Candidate

A

A. Conduct as Participants in CFA Institute Prorams

B. Reference to CFA Insitute, the CFA Desination and The CFA Program.

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19
Q

Standards of Professional Conduct - Profressionalism

Knowledge of the Law

A
  • Must understand and comply with all applicable laws, rules and regulations (including CFA) of any government, regulatory organization, licensing agency, or professional association
  • In the event of conflict, comply with the more strict law, rule or regulation.
  • Must not knowingly participate or assist in any violation and must disassociate themselves from violations.
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20
Q

Standards of Professional Conduct - Profressionalism

Independence and Objectivity

A
  • Must use reasonable care and judgement to achieve and maintain independence and objectivity in their professional activities.
  • Must not offer, solicit, or accept any gift , benefit, compensation or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity.
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21
Q

Standards of Professional Conduct - Profressionalism

Misrepresentation

A
  • Must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.
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22
Q

Standards of Professional Conduct - Profressionalism

Misconduct

A
  • Must not engage in any professional conduct involving dishonesty, fraud or deceit
  • Must not commit any act that reflects adversely on their professional reputation, integrity, or competence.
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23
Q

Standards of Professional Conduct - Integrity of Capital Markets

Material Non-Public Information

A
  • Must not act or cause others to act on material nonpublic information that could affect the value of an investment.
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24
Q

Standards of Professional Conduct - Integrity of Capital Markets

Market Manipulation

A
  • Must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participation.
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25
Q

Standards of Professional Conduct - Duties to Clients

Loyalty, Prudence, and Care

A
  • Have a duty of loyalty to their clients
  • Must act with reasonable care and exercise prudent judgement
  • Must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests.
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26
Q

Standards of Professional Conduct - Duties to Clients

Fair Dealing

A
  • Must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action or engaging in other professional activities.
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27
Q

Standards of Professional Conduct - Duties to Clients

Suitability

A
  • When in an advisory relationship with a client they must:
    • make a reasonable inquiry into the client’s investment experience, risk and return objectives, and financial constraints prior to making a recommendation or taking action and must update this information regularly.
    • Determine if an investment is suitable to the clients finaical situation and is consistent with their written objectives
    • Judge the suitability of an investmetn in the context of the client’s overall portoflio
  • When responsible for managing a portoflio to a specific mandate, strategy or style they must:
    • only make recommendations or take action consistent with stated objectives and contstraints.
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28
Q

Standards of Professional Conduct - Duties to Clients

Performance Presentations

A
  • Must make reasonable efforts to ensure that it is fair, accurate and complete.
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29
Q

Standards of Professional Conduct - Duties to Clients

Preservation of Confidentiality

A

Must keep information about current, former and prospective clients confidential unless:

  • The information concerns illegal activities on the part of the client or prospective client
  • Disclosure is required by law
  • The client permits it
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30
Q

Standards of Professional Conduct - Duties to Employers

Loyalty

A
  • Must act for the benefit of their employer
  • Must not deprive their employer of the advantage of their skills and abilities
  • Must not divulge confidential information
  • Must not otherwise cause harm to their employer
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31
Q

Standards of Professional Conduct - Duties to Employers

Additional Compensation Arrangements

A
  • Must not accept gifts, benefits, compensation or consideration that competes with , or might reasonably be expected to create a conflict of interest with their employer’s interest unless they obtain written consent from all parties involved.
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32
Q

Standards of Professional Conduct - Duties to Employers

Responsibilities of Supervisors

A
  • Must make reasonable efforts to ensure that anyone subject to their supervision or authority complies with applicable laws, rules regulations and the Code and Standards.
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33
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Diligence and Reasonable Basis

A
  • Must exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions.
  • Must have a reasonable and adequate basis, supported by appropriate research and investigation, for an investment analysis, recommendations or action.
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34
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Communication wiht Cilents and Prospective Clients

A
  • Must disclose the basic format and general principles of the investment processes used to analyze investments, select securities and construct portfolios and must promptly disclose any material changes.
  • Must disclose significant limitations and risks associated with the investment process.
  • Use reasonable judgement in identifying which factors are important to their investment analysis, recommendation or actions and include those factors in communications
  • Distinguish between fact and opinion
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35
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Record Retention

A
  • Must develop and maintain appropriate records to support their investment analysis, recommendations and actions
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36
Q

Standards of Professional Conduct - Conflicts of Interest

Disclosure of Conflicts

A
  • Must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to clients/ employers.
  • Must ensure that disclosures are prominent, in plain langauge and communicate the relevant information effectively.
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37
Q

Standards of Professional Conduct - Conflicts of Interest

Priority of Transactions

A
  • Must give priority to investmetn transactions for client s and employers over those where the candidate is the beneficial owner
38
Q

Standards of Professional Conduct - Conflicts of Interest

Referral Fees

A
  • Must disclose to employers / clients any compensation, considerations or benefit received from or paid to others for the recommendation of products or services.
39
Q

Standards of Professional Conduct - Responsibilities as a CFA Institute Member or CFA Candidate

Conduct as Participants in CFA Institute Programs

A

Must not engage in any conduct that compromises the reputation or integrity of the CFA Institute or the CFA designation or the integrity, validity or security of the CFA Institute programs.

40
Q

Standards of Professional Conduct - Responsibilities as a CFA Institute Member or CFA Candidate

Reference to CFA Institute, the CFA Designation, and the CFA Program

A
  • Must not misrepresent or exaggerate the meaning or implications of membership in CFA Institute, holding he CFA designation, or candidacy in the CFA program.
41
Q

What should a member do if they become aware of violations or applicable rules or laws?

A
  • Approach a supervisor or compliance department
  • Disassocoiate from the activity
  • In extreme cases, resign from the firm.
42
Q

Standards of Professional Conduct - Profressionalism
Knowledge of the Law

Recommendations for Members

A
  • Establish or encourage the firm to establish procedures to keep emoloyees information of chanes to applicable laws/rules/regs.
  • Review (or encourage) the firm’s written compliance procedures on a regular basis.
  • Maintain, or encourage employer to maintain, copies of current laws/rules/regs
  • When in doubt about legality, consult supervisor / compliance / lawyer
  • When dissociating from violations, keep records documenting the violations, and encourage employer to end violations.
  • There is no CFA requirement to report wrongdoers, but local law may require it.
  • “Strongly encouraged” to report violations to the CFA Institute Professional Conduct Program
43
Q

Standards of Professional Conduct - Profressionalism
Knowledge of the Law

Violations of this standard include:

A
  • Violating applicable laws/ rules / regs or the CFA Code of standards
  • Not adhering to the most strict law / rule / reg
  • Not approachin a supervisor / compliance group when violations are identified
  • Not disassociatin themselves from a violation
44
Q

Standards of Professional Conduct - Profressionalism
Knowledge of the Law

Recommendations for firms

A
  • Have a code of ethics
  • Provide employees with information on laws/rules and regs
  • Have procedures for reporting suspected violations
45
Q

Standards of Professional Conduct - Profressionalism
Independence and Objectivity

Recommendations for Members

A
  • Members or firms should pay for their own travel to company events or tours when practicable and limit the use of cooperate aircraft to trips for which commercial travel is not an alternative.
46
Q

Standards of Professional Conduct - Profressionalism
Independence and Objectivity

Recommendations for Firms

A
  • Restrict employee participation in IPOs and private placements, require pre-approval for participation
  • Appoint a compliance officer, have written policies on independence and objectivity and clear procedures for reporting violations.
  • Limit gifts, other than from clients, to token items only.
47
Q

Standards of Professional Conduct - Profressionalism
Independence and Objectivity

Violations include:

A
  • Allow investment recommendations or analysis to ve influenced by pressure or inducement
  • Allocating oversubscribed IPOs to a personal account
  • Accepting, soliciting or offering thins of value that could be expected to influence the member’s or others independence or objectivity
  • Not disclosing client gifts (prior to acceptance if possible)
  • Accepting compensation that dependent on the conclusions, recommendations or market impact of the report
  • Failure to disclosure that research is issuer-paid
48
Q

Standards of Professional Conduct - Profressionalism
Misrepresentation

Recommendations for Members

A
  • Prepare a summary of experience, qualifications, and services a member is able to perform
  • Encourage employers to develop procedures for verifying marketing materials provided by 3rd parties
  • Cite the source of any summaries of materials provided by others
  • Keep copies of all reports/articles/materials used in the preparation of research reports.
  • Provide a list - in writing - of the firms’ available services and qualifications
  • Periodically review documents and communications of members for any misrepresentation of employee or firm qualifications and capabilities.
49
Q

Standards of Professional Conduct - Profressionalism
Misrepresentation

Violations include

A
  • Presenting third-party research as your won, without attribution to the source.
  • Guaranteeing a specific return on securities that do not have an explicit guarantee from a government body or financial institution.
  • Selecting a valuation service because it puts the highest value on untraded security holdings.
  • Presenting performance data or attribution analysis that omits accounts or relevant variables.
  • Offering false or misleading information about the analyst’s or firm’s capabilities, expertise or experience.
  • Using marketing materials from a thrid party that is misleading
50
Q

Standards of Professional Conduct - Profressionalism
Misconduct

Recommendations for Firms

A
  • Develop and adopt a code of ethics and make clear that unethical behavior will not be tolerated.
  • Give employees a list of potential violations and sanctions, includin dismissal
  • Check references of potential employees
51
Q

Standards of Professional Conduct - Profressionalism
Misconduct

Violations include:

A
  • Dishonesty, fraud or deceit
  • Committing any act that reflects adversely on their professional reputation, integrity, or competence
  • Using the enforcement of the standard against another member to settle personal, political or other dispute that are not related to professional ethics or competence.
52
Q

Standards of Professional Conduct -Integrity of Capital Markets

Material Non Public Information

Recommendations for Members

A
  • Make reasonable efforts to achieve public dissemination by the firm of information they posses
  • Encourage their firms to adopt procedures to present the misuse of material nonpublic information.
53
Q

Standards of Professional Conduct -Integrity of Capital Markets

Material Non Public Information

Recommendations for Firms

A
  • Use a firewall within the firm, with elements including:
    • exercise substantial control of relevant interdepartmental communications through a clearance area such as compliance or legal depts.
    • Review employee trades
    • Maintain ‘watch’, ‘restricted’ and ‘rumor’ lists
  • Monitor and restrict proprietary trading while a firm is in possession of material nonpublic information.
    • Only take the opposite side of unsolicited customer trades.
54
Q

Standards of Professional Conduct -Integrity of Capital Markets

Material Non Public Information

Violations include

A
  • Acting or causing others to act on material nonpublic information
  • Actin on material nonpublic information by transacting / recommending mutual funds containing the subject securities, as well swaps / options contracts pertainin to those securities
  • using material nonpublic information received for the purposes of a specific transaction for any other purpose than its intended use.
55
Q

Mosaic Theory

A
  • Researching an investment conclusion through perceptive analysis of public information with non-material nonpublic information
  • This is not a violation of the Standards.
56
Q

Standards of Professional Conduct - Integrity of Capital Markets
Market Manipulation

Violations include

A
  • Any intent to mislead in order to affect security values and trading volumes
  • Spreading false information
  • Making trades intended to mislead market participants.
57
Q

Standards of Professional Conduct - Duties to Clients

Loyalty, Prudence and Care

Recommendations for Members

A
  • Follow applicable laws/ rules / regs
  • Establish client investment objectives
  • Consider Suitability of the portfolio relative to the client’s needs and circumstances, the investment’s or total portfolio’s characteristics
  • Diversify
  • Deal fairly with all clients
  • Disclose conflicts
  • Disclose compensation arrangements
  • Vote proxies in the best interest of clients and ultimate beneficiaries
  • Maintain confidentiality
  • Seek best execution
58
Q

Standards of Professional Conduct - Duties to Clients

Loyalty, Prudence and Care

Violations

A
  • Not exercising prudence, care, skill and dilience that a person acting in a like capacity would use.
  • Manaing pools of lcietns assets not in accordance with governing documents (i.e. trust docs)
  • Not making investment decisions in the context of the total portfolio
  • Inform clients of limitations in an advisory relationship (i.e. only recommending their own firms investments)
  • Not voting proxies in an informed and responsible manner.
  • Not usin client borkerae or ‘soft dollars’ / ‘soft commission’ for the benefit of the client
59
Q

Standards of Professional Conduct - Duties to Clients

Fair Dealing

Recommendations for Memebers

A
  • Encourage firms to establish compliance procedures requiring proper dissemination of investment recommendations and fair treatment of all customers and clients.
  • Maintain a list of clients and holdings - used to ensure that all holders are treated fairly
60
Q

Standards of Professional Conduct - Duties to Clients

Fair Dealing

Recommendations for Firms

A
  • Limit the number of people aware of changes to recommendations
  • Shorten the time frame between decision and dissemination
  • Publish personnel guidelines for pre-dissemination
    • Prohibit personnel who have prior knowledge of a recommendation from discussing it or taking action on it.
  • Disseminate new/changed recommendations simultaneously to all silents how have expressed an interest for for whom an investment is suitable
  • Develop written trade allocation procedures
  • Disclose trade allocation procedures
  • Establish systematic account reviews
  • Disclose available levels of service
61
Q

Standards of Professional Conduct - Duties to Clients

Suitability

Recommendations for Members

A
  • For each client, put the needs, circumstances and investment objectives into a written IPS
  • Consider the type of client and whether there are separate beneficiaries, investor objectives, investor constraints, and performance measuremnt benchmarks
  • Review the investor’s objectives and constraints periodically to reflect any chanes in client circumstances.
62
Q

Standards of Professional Conduct - Duties to Clients

Suitability

What should an investment manager do in the event of an unsuitable unsolicited trade request?

A
  • The manager should not make the trade until he has discussed with the client the reason it is unsuitable based on the client’s IPS.
  • If the impact on the overall return / risk profiel is minimal:
    • The manager may follow his firm’s poilicy for unsuitable trades.
    • The client must acknowlede the discussion and an understanding of why the trade is unsuitable
  • If the impact on the overall return / risk profiel is material:
    • The IPS may be changed with client acceptance
    • If the client does not agree to the IPS change, the manager may execute the trade in a separate clint-directed account following firm policy
63
Q

Standards of Professional Conduct - Duties to Clients

Performance Presentation

Recomomendation to Members

A
  • Encourage firms to adhere to Global INvestmetn Performance Standards (GIPS)
  • Consider the sophistication of the audience
  • Present the performance of a weihted composite of similiar portoflios rather than the perfoamcne of a single account.
  • Include terminated accounts as part of historical performance and clearly state when they were terminated
  • Include all appropriate disclosures to fully explain results
  • Maintain data and records used to calculate the performance being presented.
64
Q

Standards of Professional Conduct - Duties to Clients

Performance Presentation

Violations

A
  • Misstating performance
  • Misleading clients or prospects about their investment performance or their firm’s investment performance
  • Misrepresent past performance or reasonably expected performance
  • Stating or implying the ability to achieve a rate of return similar to the achieved in the past.
  • Not making detailed information avaialble upon request or indicating that limited information was made available in a brief presentation.
65
Q

Standards of Professional Conduct - Duties to Clients

Preservation of Confidentiality

Recommendations for Members

A
  • Avoid disclosing information received from a client except to authorize coworkers who are also working for the client.
  • Follow firm procedures for storage of electronic data and recommend adoption of such procedures if they are not in place
66
Q

Standards of Professional Conduct - Duties to Employers

Loyalty

Recommendations for Members

A
  • Encouraged to give their employer a copy of the code of standards
  • Best practice is to use separate social media accounts for personal and professional communications
67
Q

Standards of Professional Conduct - Duties to Employers

Loyalty

Recommendations for Firms

A
  • Employers should not have incentive and compensation systems that encourage unethical behavior.
68
Q

Standards of Professional Conduct - Duties to Employers

Loyalty

Violations

A
  • Engaging in activities that may injur their firm, deprive them of profit or the advantage of the employees skill / abilities
  • Receiving compenstation from someone other than the employer wihtout prior approval
  • Engaging in the following when leaving an employer prior to their effective resignation:
    • misappropriation of trade secrets
    • misuse of confidential information
    • solicitin employer’s clients prior to leaving
    • self-dealing
    • misappropriation of client lists
  • Not adhering to their employer’s policies concerning social media
    *
69
Q

Standards of Professional Conduct - Duties to Employers

Additional Compensation Arrangements

Recommendations for Members

A
  • Make an immediate written report to the employer detailing any proposed compensation and services (if additional to employer comp).
  • Partime members should discuss any arrangements that may compete with their employer’s interest at the time they are hired and abide by employer limitations
    *
70
Q

Standards of Professional Conduct - Duties to Employers

Additional Compensation Arrangements

Recommendations for Firms

A
  • Verify details of compensation arrangements with the offering firm.
71
Q

Standards of Professional Conduct - Duties to Employers

Additional Compensation Arrangements

What consitutes compensation?

A
  • Direct and indirect compenstation from a client and or other benefits recevied from third parties
72
Q

Standards of Professional Conduct - Duties to Employers

Additional Compensation Arrangements

Is the following a gift or compensation?
A client offers a bonus that depends on the future performance of her account.

A

Additional compensation

Requires advance written consent.

73
Q

Standards of Professional Conduct - Duties to Employers

Additional Compensation Arrangements

Is the following a gift or compensation?

A client offers a bonus to reward a member for her account’s past performance.

A
  • This is a gift
  • Requires dsclosure to the employer to comly with Standard I(B) Independence and Objectivity
74
Q

Standards of Professional Conduct - Duties to Employers

Responsibilities of Supervisors

Recommendations for Members

A
  • Recommend that his employer adopt a code of ethics.
  • Should encourage their firm to provide their code of ethics to clients.
  • Once a compliance program exists, supervisors should:
    • Distribute it to the proper personnel
    • Update it as needed
    • Continually educate staff regarding procedures
    • Issue reminders as necessary
    • Require professional conduct evaluations
    • Review employee actions to monitor compliance and identify violations
75
Q

Standards of Professional Conduct - Duties to Employers

Responsibilities of Supervisors

Recommendations for Firms

A
  • Employers should not commingle compliance procedures with the firm’s code of ethics
  • While investigating a possible breach it is important to limit the suspected employee’s activities
  • Adequate compliance procedures should include:
    • be clearly written
    • be easy to understand
    • designate a compliance officer with authority clearly defined
    • have a system of checks and balances
    • outline the scope fo procedures
    • outline what conduct is permitted
    • contain procedures for reporting violations and sanctions
    • structure incentives so unethical behavior is not rewarded.
76
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Diligence and Reasonable Basis

Recommendations for Members

A
  • Encourage their firms to adopt a policy for periodic review of the quality of third party research
  • Enourage their firms to adopt the following policies and procedures:
    • require research/recommendations have a basis and can be substantiated as reasonable and adequate
    • have detailed written guidance for proper research and due diligence
    • have measurable criteria for judging the qualify of research , base compensation on that criteria
    • have written procedures that provide a minimum acceptable level of scenario testing, standards for range of model accuracy over time and a measure of the sensitivity of cash flows
    • Have a policy for evaluating outside providers of info
    • Adopt a set of standards for evaluating external advisers and includes a frequency for review.
77
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Diligence and Reasonable Basis

Examples of critera used to judge third-party research:

A
  • Review assumptions used
  • Determine how rigorous the analysis was
  • Identify how timely the research is
  • Evaluate objectivity and independence of the recommendations
78
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Diligence and Reasonable Basis

Considerations prior to making a recommendation or taking investment action:

A
  • Global and national economic conditions
  • A firm’s financial results and operating history, and the business cycle stage
  • Fees and historical results for mutual fund
  • Limitations fo any quantitative models used.
  • A determination of whether peer group comparisons for evluation are appropriate.
79
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Communications with Clients and Prospects

Recommendations for Members

A
  • Members should maintain records indicating the nature of the research, and be able to supply additional information if it is requested by the clietn or ot.her users of the report
80
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Records Retention

Recommendations for members

A
  • If no regulatory standards or firm policies are in place the Standard recommends a seven-year minimum holding period.
81
Q

Standards of Professional Conduct - Investment Analysis, Recommendations, and Actions

Records Retention

Recommendations for Firms

A
  • The recordkeeping requirements generally is the firm’s responsibility.
82
Q

Standards of Professional Conduct - Conflicts of Interest

Disclosure of Conflicts

What are common coflicts that must be disclosed?

A
  • Broker-dealer market - making activities
  • Board service
  • Ownership of stock in the companies that the member recommends or the clients hold.
  • Members compensation structure
    *
83
Q

Standards of Professional Conduct - Conflicts of Interest

Disclosure of Conflicts

Recommendations for Members

A
  • Any special compensation arrangements bonus programs, commissions and incentives must be disclosed.
84
Q

Standards of Professional Conduct - Conflicts of Interest

Prioritiy of Transactions

Recommendations for Members

A
  • Members can avoid conflicts that arise with IPOs by not participating in them
  • Members should encourage their firms to adopt the recommended procedures for firms.
85
Q

Standards of Professional Conduct - Conflicts of Interest

Prioritiy of Transactions

Recommendations for Firms

A
  • All firms should have basic procedures in place that address conflicts created by personal investing
    • limit employee participation in IPOs
    • restrict participation in private placements
    • establish blackout/restricted periods
    • establish reporting procedures including duplicate trade confirms, disclosure of personal holdings and beneficial ownership positions.
86
Q

Standards of Professional Conduct - Conflicts of Interest

Referral Fees

Recommendations for Members

A
  • encourage their firms to adopt clear procedures regarding compensation for referrals
  • should provide their employers with updates at least quarterly.
87
Q

Standards of Professional Conduct - Conflicts of Interest

Referral Fees

Recommendations for Firms

A
  • Firms that do not prohibit referral fees should have clear procedures for approval and policies regarding the nature and value of referral compensation received.
88
Q

Standards of Professional Conduct - Responsibilities As A CFA Institute Member/ Candidate

Conduct as Participants in teh CFA Insitute Program

What types of conduct would violate this standard?

A
  • Cheating on the CFA exam or any exam
  • reveal anything about either broad or specific topics tested, content of the exam, questions or required formulas.
  • Not following rules and policies of the CFA Program
  • Giving confidential informatino ont eh CFA Program to candidates or public
  • Improperly usin gthe designation to further personal and professional goals
  • Misrepresentaitng information on the Professional Conduct Statement (PCS) or the CFA Insitute Professional Development Program
89
Q

Standards of Professional Conduct - Responsibilities As A CFA Institute Member/ Candidate

Reference to CFA Institute, Teh CFA Designation, and the CFA Program

What must members do to matain membership?

A
  1. sign the PCS annually
  2. Pay the CFA Insitute membership dues annually
90
Q

Standards of Professional Conduct - Responsibilities As A CFA Institute Member/ Candidate

Conduct as Participants in teh CFA Insitute Program

Recommendations for Members

A
  • Members should be sure that their firms are aware of the proper references to a member’s CFA designation or candidacy, as errors in those references are common.
91
Q
A

2016 CFA Schweser (1 decks)

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