Chapter 2 - Ethics and Investment Professionalism Flashcards
What does the CFA Code of Ethics cover?
- Integrity
- Competence
- Respect
What does the CFA Professional Conduct Cover?
Standard I - Professionalism
Standard II - Integrity of Capital Markets
Standard III - Duties to Clients
Standard IV - Duties to Employers
Standard V - Sound Investment analysis and advice
Standard VI - Avoidance of Conflicts of Interest
Standard VII - Responsibilities as a CFA member/candidate
An emphasis on managerial responsibility for ethical behaviour and concern for the law, would be what kind of ethical approach?
Integrity-based
What does an outcomes-based approach aim to achieve?
Focuses on outcomes for consumer rather than the detail of rule compliance. The objective is that customer confidence would increase and firms will experience increased business.
If a situation arose in which someone had to write a report on another company, but there was a vested interest in the company (i.e. a colleague is a director there), what is the most appropriate course of action?
Write the report, but disclose all parties.
Standard VIA - Disclosure of conflicts
Which Standard Code of Ethics would be breached, if an analyst were to use information from a newspaper?
Standard I (Professionalism) - C (Misrepresentation/plagiarism)
When communicating information about investment performance, what should investment professionals employ as an accepted set of standards?
Global Investment Performance Standards (GIPS)
What is material non-public information?
Reliable information that is likely to have an impact on the price of a security, not publicly available.
Standard IIA. - No trades cannot take place under the guidance of non-material information. Unless it is disseminated to the public first.
What is mosaic theory?
Using public information and non-material non-public information to predict events. Entirely legal.
