COS 1: Professionalism Flashcards
Dealing with Laws of different countries:
When applicable law and the Code and Standards require different conduct, members and candidates must follow the more strict of the applicable law or the Code and Standards.
Applicable Law:
“Applicable law” is the law that governs the member’s or candidate’s conduct. Which law applies will depend on the particular facts and circumstances of each case
- minimal threshold of acceptable actions.
For example, applicable law or regulation may not require members and candidates to disclose referral fees received from or paid to others for the recommendation of investment products or services. Because the Code and Standards impose this obligation, however, members and candidates must disclose the existence of such fees.
Participation in or Association with Violations of others steps:
- Attempt to stop the behavior by bringing it to the attention of the employer through a supervisor or the firm’s compliance department
- If this attempt is unsuccessful, then members and candidates have a responsibility to step away and dissociate from the activity.
Dissociation may include removing one’s name from written reports or recommendations, asking for a different assignment, or refusing to accept a new client or continue to advise a current client.
What to choose in No law/less strict/more strict than C/S laws?
Always choose C/S unless law is more strict.
Another ex:
You live in MS, do business in NS/LS (but you have to follow laws in business country) then choose C/S
Do you have to report all violations?
You do not have to report/be a whistle blower, just dissociate
- Report to employer/compliance
- Dissociate
- CFA
Standard 1A: Professionalism (Knowledge of the Law)
Must ensure distributer also abide to applicable law
Standard 1B: Professionalism (Independence and Objectivity)
cannot except anything that REASONABLY could be expected to compromise own or another’s independence or objectivity
- must not offer, accept, solicit, any gift, benefit, compensation
- if someone picks up lunch (that is fine)
- avoid real/perceived situations (including social) that could impact 1B.
- if client gives a gift, notify employer (supplementary compensation)
- “firewalls” must be managed (invest. bank and research)
1B: Travel Funding
Use commercial travel at your own/or firms expense
1B: Manager selection/procurement process
- Do NOT accept gifts, donations, etc from possible hires
- REFUSE ALL
1B: Recommendations
- Protect integrity of opinions (unbiased analyst opinions, etc)
- Create a restricted list (no coverage if adverse opinion is not welcomed)
- Restrict special cost arrangements
- Limit gifts (token: hat, shirt)
- Restricts investments (IPOs, etc)
- Review procedures (have a procedure review, what are you invested in/researching)
- Independence Policy (analyst should not be supervised by potential influencing department)
- Appointed officer
1B. Issuer Paid Research
Best practice is for independent analysts, prior to writing their reports, to negotiate only a flat fee for their work that is not linked to their conclusions or recommendations.
Do not accept bonuses based on results/research
1B. Client gift giving
Members and candidates may accept bonuses or gifts from clients as long as they disclose them to their employer because gifts in a client relationship are deemed less likely to affect a member’s or candidate’s objectivity and independence than gifts in other situation
1C. Professionalism: Misrepresentation
Cannot misrepresent
- written untrue statement
- omission
- false/misleading statements (oral, written, electronic)
- DO NOT guarantee investment performance (unless part of product)
Impact on Investment Practice
- must disclose use of external managers and not claim managers performance as their own
Performance Reporting
- benchmark IS NOT REQUIRED, but if using, do not misrepresent of use non-comparable benchmarks
Social Media
- members and candidates should provide only the same information they are allowed to distribute to clients and potential clients through other traditional forms of communication
Omissions
Plagiarism
- must acknowledge source
Work completed for employer
- It is owned by firm, not you (you were paid for it)
- you can use previous internal research, BUT you can not release it under your own name
- The firm may issue future reports without providing attribution to the prior analysts.
1C. Misrepresentation: Recommended Procedures for Compliance
- Factual Presentations (firms should provide guidelines or designate who can speak for firm)
- Qualification Summary
- Verify outside information
- Maintain webpages
- Plagiarism Policy (keep copies of referenced material)
1D. Professionalism: Misconduct
- ANY conduct that reflects poorly on integrity or reputation on m/c
- even absence of appropriate conduct or lack of sufficient effort (relying on someone else)
ex. alcohol/drugs during business hours, personal bankruptcy brought about by fraud/deceitful business
Comment: Generally, Standard I(D) is not meant to cover legal transgressions resulting from acts of civil disobedience in support of personal beliefs because such conduct does not reflect poorly on the member’s or candidate’s professional reputation, integrity, or competence.
