Code and standards Flashcards
Code of Ethics (6)
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ACT. With integrity, competence, respect, diligence, ethical manner
INTEGRITY. Of investment proof. and clients interest above personal
EXERCISE. Reasonable care, Independent judgment
PRACTICE. And encourage others to practice in professional ethical, reflecting in credit
PROMOTE. integrity, uphold rules
MAINTAIN. Improve professional
Standards of Professional Conduct (7)
- Professionalism
- Integrity of Capital Markets
- Duties to clients
- Duties to employers
- Investment Analysis
- Conflict of interest
- responsibilities of being a CFA candidate
Professionalism (4)
- Knowledge of the law
- Independence and objectivity
- Misrepresentation
- Misconduct
I) (A) Knowledge of the law (3)
- Undestand and comply laws. including codes and regulation
- Comply with Most strict rules, law or regulation
- Can’t knowling assist in violation, without dissociation
I) (A) Knowledge of the law. Guidance (6)
INDIVIDUALS
1. Take the Most Strict
2. First, notify supervisor or compliance
3. May confront wrongdoer directly (Strongly encouraged)
4. Dissociate and keep records
5. Inaction may be interpreted as participation
6. No REQUIREMENT to report for government authorities or CFA (Except in few cases)
FIRMS
have a code of ethics
Provide information of law
Procedures to report suspicious
I) (A) Professionalism:
Knowledge of law: Recommended Procedures (6)
- Keep informed. Regularly written compliance procedures. Maintain files
- Seek compliance and legal advice as needed.
- Ecourage firms to adopt code of ethics
- Distribute (Dissemine) internal information on application of laws and regulations
- Have written procedures for reporting suspect violations
- Strong encourage to report violations by others
I) Professionalism (B)
Independence and objectivity: Standard (2)
- Use reasonable care and independent judgment to achieve and maintain professional activities
- Do not offer os solicit or accept compensation that could compromise the independence or objectivity
I) Professionalism: (B)
Independence and objectivity: Guidance (9)
- Modest Gifts - ok
- Distinguish a gift from CLIENTS and from ENTITIES trying to influence behavior
- MAY accept gifts from clients, DISCLOSE to employer
get PERMISSION if the gift is for PERFORMANCE - MEMBERS responsible to HIRING MANAGERS should NOT accept gifts, travel or eterneinment that could compromise objective
- Investment Banking - do not bow to pressure to issue favorable research
6.** Issuer-paid** research, flat-rate fee
- members in credit rating firms should avoid influence by issuing firms
- Users of Credit Rating should be aware of potential conflicts
- Best Practice - Analyst should pay for their own commercial travel to firms being analyzed. IF THE TRIP IS EFFECTVELLLY UNAVAIBLE OR LOCATION IS HARD TO REACH, ACCEPT
CFA Institute Professional conduct program can impose sanctions on
example of sanctions:
A member can search for an Appel for sanction?
Charges with mismeneor of personal acts grounds for suspention?
Charterholders and cadidates
Firms are not part of the institute
Sanctions:
1. Public censure
2. Suspension of CFA institute
3. Revocation of CFA charter
appel? yes.
No. I.e Possession of narcotics RRSR
Pode droga, o que nao pode é insider trading kakaka
I) Professionalism:
(C) Misrepresentation:
Guidance (6)
1.Prepare and sumarize materials
2.Encourage employeers to produce and check marketing materials
3.Cite the sources of materials. NO PROBLEM to use public sources without checking the acknwoledge
4. Keep copies of materials in research prep
5. Periodically review the docs
I) Professionalism:
(D) Miscounduct:
Guidance (3)
- Personal bankrupcy nao implica em violar a norma (desde que nao tenha a ver com dishonesty, fraud, etc…)
- Evertihing whchi would compromise the hability of a member to performe is violating
- DISHONESTY, FRAUD, DECEIT = Violation
II) Integrity of Capital Markets
(A) Material non public information
Guidance (8)
1.Material is: Anything that will affect an assets price or investor would like to know before making decisions.
2.If price affect is ambiguos, information is not considered material
3.Extends to credit rating change or influential analysis
4.info is nonpublic until is not avaiable to the marketplace
5.information avaible to analystis consider nonpublic until is not avaible to general investor
6.” Acts” Includes Swaps, Options and funds with security
8.7.If you posses non-public, act as you didnt know.
8.Mosaic Theory: No violation with analyst use Non Material nonpublic + public to reach a conclusion, even though it becomes material
II) Integrity of Capital Markets
(A) Material non public information
Recommended Procedure (4)
1.Information barrier or “firewall” is recomended to control interdepartamental commun.
2. Information barrier includes use a restricted list
3. Review employee trades
4. A member cannot trade or persuate others to trade when firm (or individual) posses nonpublic info
II) Integrity of Capital Markets
(B) Market Manipulation
Guidance (2)
- Do not engage in
transaction based on manipulation - false impression of price movement; Gain dominant position in an asset (Or derivative )to manipulate price - Do not distribute false or misleading info.
III) Duties to Clientes
(A) Loyalty, prudence and Care
Guidance (8)
- Take investment Actions in clients best interest
- exercise prudence, care that a person familiar with would use
- Follow applicable fiduciaty duty
- Client may be investing public
- Manage pool of assets according to the policy documents (Governing documents)
- Make investment decisions based on context of total portfolio
- Vote proxies responsible and disclose proxy voting policies with clients.
May not vote all proxies
Index stock funds must vote in proxies - “Soft Dollars’’ must benefit clients
- Brokerage is an asset of clients
