CFA Standards

Question 1

What are the 6 CFA standards of Professional Conduct

Answer 1

1. Professionalism
2. Integrity of capital markets
3. Duties to clients.
4. Duties to employers
5. Investment analysis, Recommendations and actions
6. Conflicts of Interests

Question 2

Under professionalism

Answer 2

• have knowledge of the law understand and comply with all acceptable laws
• maintain independence and objectivity don’t accept bribes/gifts that can be interpreted as bribes to compromise independence/objectivity. Use reasonable care and judgement
• avoid misrepresenting don’t knowingly misrepresent recommendations, investment analysis or other professional activities
• avoid misconduct no dishonesty, fraud, deceit, or crime that reflects adversely to professional reputation, integrity or competence.

Question 3

Integrity of capital markets

Answer 3

Material non public information: don’t use any information that isn’t public and could change the value of an investment.
market manipulation: must not engage in practices that change prices or artificially inflate trading volumes with the intent to mislead market participants.

Question 4

Duties to employers

Answer 4

Loyalty: be loyal to your employers
Additional compensation arrangements: do not accept any gifts or compensation that can make your interests conflict with the interests of your employer
Supervisor responsibility: it’s the supervisors responsibility to ensure their employees know the acceptable practices and abide by the codes of conduct

Question 5

Duties to clients

Answer 5

1. Loyalty, prudence, and care: use reasonable care and exercise prudence when judging
2. Fair dealing: deal fairly and objectively with all clients
3. Suitability: have written down the clients investment experience, constraints, risk and return objectives.
4. Performance presentation: make reasonable effort to ensure investment performance information is fair, accurate and complete when communicating it
5. Preservation of confidentiality:keep info confidential for past, current and prospective clients unless law requires it, client gives permission or info is about illegal activities

Question 6

Investment analysis, recommendations, actions

Answer 6

1. Diligence and reasonable basis: be diligent in analyzing investments and making the right decisions. Have a reasonable research basis for any decision, recommendation or analysis
2. Communication with clients and prospective clients: disclose basics of investments process and any material changes to the process. Distinguish between fact and opinion. Disclose significant risks.
3. record retention: make and keep appropriate records to support investment analyses, actions and comms with clients

Question 7

Conflicts of interest

Answer 7

• disclose conflicts
• priority of transactions
• referral fees