CFA Ethics

Question 1

CFA Conduct program/enforcement of standards (1) LOS 1a

Answer 1

Inquiries stemming from: self disclosure, subject of written complaint, evidence of misconduct, possible exam violation reported by proctor

Question 2

CFA Conduct program/enforcement of standards (2) LOS 1a

Answer 2

Inquiry Begins: staff may request explanation, interview subject/complainant, collect docs/records relevant to the investigation

Question 3

CFA Conduct program/enforcement of standards (3) LOS 1a

Answer 3

Officer may decide: no sanctions, caution, discipline. In case of discipline, member can reject and go in front of a panel.

Question 4

6 parts of code of ethics

LOS 1b

Answer 4

Act with integrity/ethical manner.
Integrity of profession and interest of clients placed above personal interests.
Use reasonable care/judgment when making investment decisions
Encourage others to practice in a professional manner, as a credit to the profession.
Promote integrity/rules of the capital markets.
Maintaint/improve professional competence.

Question 5

7 standards of professional conduct

LOS 1b

Answer 5

Professionalism
Integrity of capital markets
Duties of clients
Duties of employers
Investment analysis, recommendations, actions
Conflicts of interest
Responsibility as a CFA member/candidate

Question 6

Professionalism LOS 1c

Answer 6

Knowledge of the law - comply with most strict law, must not knowingly violate laws/must disassociate from such violations.
Independence and Objectivity - must use reasonable care and judgment to maintain I&O, not accept gifts that might compromise this.
Misrepresentation - members must not knowingly misrepresent (re professional activities)
Misconduct - must not engage in any prof. conduct involving dishonesty, fraud etc, or which reflects adversely on their prof rep, integrity etc.

Question 7

Integrity of Capital Markets LOS 1c

Answer 7

MNPI - must not act on MNPI

Market Manipulation - can’t distort prices/trading volumes with intent to mislead

Question 8

Duties to clients LOS 1c

Answer 8

Loyalty, Prudence and Care - loyalty to client, use of prudent judgment, reasonable care, client’s interests first.
Fair Dealing - must act fairly and objectively
Suitability(advisory) -
Suitability(PM) -
Performance Presentation - fair, accurate, complete communication of inv. perf.
Preservation of Confi - maintained unless client acting illegally, or reqd by law, or client allows disclosure.

Question 9

Duties to clients LOS 1c - Suitability

Answer 9

Advisory - a) reasonable inquiry into client IO, risk/return objectives, financial constrants before acting, and regularly update this info
b) determine an investment is suitable given client’s written objectives before recommending/acting
c)judge suitability of investments in context of client’s entire portfolio
PM - make only recommendations/investments consistent with stated objectives/constraints of the portfolio