Ethics

Question 1

suitability standard

Answer 1

Suitability refers to the match between client return requirements and risk tolerances and the characteristics of the securities recommended.

Question 2

fiduciary standard

Answer 2

A fiduciary standard requires professionals to use their knowledge and expertise to act in the best interests of the client.

Question 3

ethical decision-making framework

Answer 3

• Identify: Relevant facts, stakeholders and duties owed, ethical principles, conflicts of interest.
• Consider: Situational influences, additional guidance, alternative actions.
• Decide and act.
• Reflect: Was the outcome as anticipated? Why or why not?

Question 4

Code of Ethics

Answer 4

• Act with integrity, competence, diligence, respect, and in an ethical manner
• Place the integrity of the investment profession and the interests of clients above their own personal interests.
• Use reasonable care and exercise independent professional judgment when conducting investment activities
• Practice and encourage others to practice in a professional and ethical manner.
• Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
• Maintain and improve their professional competence.

Question 5

The Standards of Professional Conduct

PIDDICR

Answer 5

• Professionalism
• Integrity of Capital Markets
• Duties to Clients
• Duties to Employers
• Investment Analysis, Recommendations, and Actions
• Conflicts of Interest
• Responsibilities as a CFA Institute Member or CFA Candidate

Question 6

Sanctions that CFA Institute may impose on a member or candidate under the Professional Conduct Program include:

Answer 6

• public censure
• suspension from membership and use of the CFA designation
• revocation of the CFA charter
• suspension of a candidate’s participation in the CFA program.

Question 7

a professional

Answer 7

• specialised knowledge
• provides service to others
• common code of ethics

Question 8

Challenges to ethical behaviour

Answer 8

• overconfidence in own morality
• situational influences
• focusing on short-term outcomes, not long-term outcomes

Question 9

Disadvantage of using a compliance approach to decision making?

Answer 9

Can oversimplify the decision making process and discourage decision makers from seeing the bigger picture

Question 10

Mosaic Theory

caveat for Standard II (A): Integrity of Capital Markets - Material Non-public information

Answer 10

combining non-material, non-public information with public information to reach a conclusion (allowed)