CFA Code of Ethics Flashcards
What does the standard 1A Knowledge of the law state?
Members and Candidates must understand and comply with all applicable laws, rules, and regulations
(including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing
their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations.
What does the standard 1B Independence and Objectivity state?
Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. Members
and Candidates 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.
What does the standard 1C Misrepresentation state?
Members and Candidates must not knowingly
make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.
What does the standard 1D Misconduct state?
Members and Candidates must not engage in any
professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence.
What does the standard 2A Material Non Public Information State?
Members and Candidates who
possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.
What does the standard 2B Market Manipulation state?
Members and Candidates must not engage
in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.
What does the standard 3A Loyalty, Prudence and Care state?
Members and Candidates have a duty
of loyalty to their clients and must act with reasonable care and exercise prudent judgment. Members and Candidates must act for
the benefit of their clients and place their clients’ interests before their employer’s or their own interests.
What does the standard 3B Fair Dealing state?
Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities.
What does the standard 3C Suitability state?
When Members and Candidates are in an advisory relationship
with a client, they must:
a. Make a reasonable inquiry into a client’s or prospective
client’s investment experience, risk and return objectives,
and financial constraints prior to making any investment
recommendation or taking investment action and must
reassess and update this information regularly.
b. Determine that an investment is suitable to the client’s
financial situation and consistent with the client’s written
objectives, mandates, and constraints before making an
investment recommendation or taking investment action.
c. Judge the suitability of investments in the context of the
client’s total portfolio.
- When Members and Candidates are responsible for managing
a portfolio to a specific mandate, strategy, or style, they must
make only investment recommendations or take only investment actions that are consistent with the stated objectives
and constraints of the portfolio.
What does the standard 3D Performance Presentation state?
When communicating investment
performance information, Members and Candidates must make reasonable efforts to ensure that it is fair, accurate, and complete.
What does the standard 3E Preservation of Confidentiality state?
Members and Candidates 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, or
- The client or prospective client permits disclosure of the
information.
What does the standard 4A Loyalty state?
In matters related to their employment, Members and
Candidates must act for the benefit of their employer and not
deprive their employer of the advantage of their skills and abilities, divulge confidential information, or otherwise cause harm to their employer.
What does the standard 4B Additional Compensation Arrangements state?
Members and Candidates 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.
What does the standard 4C Responsibilities of Supervisors state?
Members and Candidates 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.
What does the standard 5A Diligence and Reasonable Basis state?
Members and Candidates must:
- Exercise diligence, independence, and thoroughness in
analyzing investments, making investment recommendations,
and taking investment actions. - Have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action.
