Ethics

Question 1

Standard III(E): Preservation of Confidentiality

Answer 1

Members and candidates must keep information about current, former, and prospective clients confidential except when:

1. Information concerns illegal activities on part of client
2. Disclosure required by law
3. Client or prospect permits disclosure of information

Question 2

Standard IV(A): Duties to Employers - Loyalty

Answer 2

Concerning duties to employers. Members and candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information, or cause harm to their employer.

Question 3

Standard VII(A): Conduct as a Participant in CFA Institute Programs

Answer 3

Requires that members and candidates not engage in any conduct that compromises the reputation or integrity of CFA institute or CFA designation, or the integrity, validity or security of CFA institute programs

Question 4

Standard I(A): Professionalism - Knowledge of the Law

Answer 4

Members or candidates must understand and comply with all applicable laws, rules, and regulations (including CFAI Code of Ethics & Professional Conducts)

Must comply with the more strict law, rule, or regulation

Not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations

Question 5

Standard I(B): Professionalism - Independence and Objectivity

Answer 5

Members or candidates must use reasonable care and judgement to achieve and maintain independence and objectivity in their professional activities.

Must not offer, solicit, or accept any gift, benefit, compensation that could comprise their own or another’s independence and objectivity

Question 6

Standard I(C): Professionalism - Misrepresentation

Answer 6

Members or candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions or other professional activities

Question 7

Standard I(D): Professionalism - Misconduct

Answer 7

Members and candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence

Question 8

Standard II(A): Integrity of Capital Markets - Material Nonpublic Information

Answer 8

Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information

Question 9

Standard II(B): Integrity of Capital Markets - Market Manipulation

Answer 9

Members or Candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants

Question 10

Standard III(A): Duties to Clients - Loyalty, Prudence, and Care

Answer 10

Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgement.

Must act for the benefit of their clients and place their clients’ interest before their employers or their own interest

Question 11

Standard III(B): Duties to Clients - Fair Dealing

Answer 11

Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities

Question 12

Standard III(C): Duties to Clients - Suitability

Answer 12

In an advisory relationship, you must:

1. Inquire into client’s or prospect’s investment experience, risk & return objectives, and financial constraints before making investment recommendations or taking investment action and reassess/update this information regularly
2. Determine investment suitability to client’s financial situation and consistent with client’s written objectives, mandates, and constraints PRIOR to investment recommendation or investment action
3. Suitability of investment should be in the context of client’s total portfolio
4. For a given portfolio mandate, strategy, or style, only make recommendations or actions that are consistent with stated objectives and constraints

Question 13

Standard III(D): Duties to Clients - Performance Presentation

Answer 13

When communicating investment performance information, you must make reasonable efforts to ensure that it is fair, accurate, and complete

Question 14

Standard IV(B): Duties to Employers - Additional Compensation Arrangements

Answer 14

Must not accept gifts, benefits, compensation, or consideration that competes with or might reasonably be expected to create a conflict of interest with their employer’s interest unless they obtain written consent from all parties involved

Question 15

Standard IV(C): Duties to Employers - Responsibilities of Supervisors

Answer 15

Must take reasonable efforts to ensure that anyone subject to their supervision or authority complies with applicable laws, rules, regulations, and the code & standards

Question 16

Standard V(A): Investment Analysis, Recommendations and Actions - Diligence and Reasonable Basis

Answer 16

Must:

1. Exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions
2. Have reasonable and adequate basis supported by appropriate research and investigation, for any investment analysis, recommendation, or action

Question 17

Standard V(B): Investment Analysis, Recommendations, and Actions - Communication with Clients and Prospective Clients

Answer 17

Must:

1. Disclose to clients and prospects format and general principles of the investment process related to their investment analysis, securities selection, and portfolio construction and promptly disclose changes that might materially affect those processes
2. Disclose significant limitations and risks associated with the investment process to clients and prospects
3. Use reasonable judgement to identify factors important to their analysis, recommendations, or actions and include them in communications with clients or prospects
4. Distinguish between fact and opinion in the presentation of investment analysis and recommendations

Question 18

Standard V(C): Investment Analysis, Recommendations, and Actions - Record Retention

Answer 18

Must develop and maintain appropriate records to support their investment analysis, recommendations, actions and other investment-related communications with clients and prospective clients

Question 19

Standard VI(A): Conflicts of Interest - Disclosure of Conflicts

Answer 19

Must make full and fair disclosure of all matters that could be expected to impair their independence and objectivity or interfere with respective duties to clients, prospects, and employer

Must ensure disclosures are delivered in plain language and communicated effectively

Question 20

Standard VI(B): Conflicts of Interest - Priority of Transactions

Answer 20

Investment transactions for clients and employers must have priority over investment transactions in which member/candidate is beneficial owner

Question 21

Standard VI(C): Conflict of Interest - Referral Fees

Answer 21

Must disclose to their employer, client, and prospects any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services

Question 22

Standard VII(B): Reference to CFA Institute, CFA designation, and program

Answer 22

Must not misrepresent or exaggerate the meaning or implications of membership in CFAI, holding the CFA designation, or candidacy in the CFA program