Ethics Flashcards
Standard III(E): Preservation of Confidentiality
Members and candidates must keep information about current, former, and prospective clients confidential except when:
- Information concerns illegal activities on part of client
- Disclosure required by law
- Client or prospect permits disclosure of information
Standard IV(A): Duties to Employers - Loyalty
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.
Standard VII(A): Conduct as a Participant in CFA Institute Programs
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
Standard I(A): Professionalism - Knowledge of the Law
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
Standard I(B): Professionalism - Independence and Objectivity
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
Standard I(C): Professionalism - Misrepresentation
Members or candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions or other professional activities
Standard I(D): Professionalism - Misconduct
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
Standard II(A): Integrity of Capital Markets - Material Nonpublic Information
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
Standard II(B): Integrity of Capital Markets - Market Manipulation
Members or Candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants
Standard III(A): Duties to Clients - Loyalty, Prudence, and Care
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
Standard III(B): Duties to Clients - Fair Dealing
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
Standard III(C): Duties to Clients - Suitability
In an advisory relationship, you must:
- 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
- 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
- Suitability of investment should be in the context of client’s total portfolio
- For a given portfolio mandate, strategy, or style, only make recommendations or actions that are consistent with stated objectives and constraints
Standard III(D): Duties to Clients - Performance Presentation
When communicating investment performance information, you must make reasonable efforts to ensure that it is fair, accurate, and complete
Standard IV(B): Duties to Employers - Additional Compensation Arrangements
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
Standard IV(C): Duties to Employers - Responsibilities of Supervisors
Must take reasonable efforts to ensure that anyone subject to their supervision or authority complies with applicable laws, rules, regulations, and the code & standards
Standard V(A): Investment Analysis, Recommendations and Actions - Diligence and Reasonable Basis
Must:
- Exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions
- Have reasonable and adequate basis supported by appropriate research and investigation, for any investment analysis, recommendation, or action
Standard V(B): Investment Analysis, Recommendations, and Actions - Communication with Clients and Prospective Clients
Must:
- 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
- Disclose significant limitations and risks associated with the investment process to clients and prospects
- Use reasonable judgement to identify factors important to their analysis, recommendations, or actions and include them in communications with clients or prospects
- Distinguish between fact and opinion in the presentation of investment analysis and recommendations
Standard V(C): Investment Analysis, Recommendations, and Actions - Record Retention
Must develop and maintain appropriate records to support their investment analysis, recommendations, actions and other investment-related communications with clients and prospective clients
Standard VI(A): Conflicts of Interest - Disclosure of Conflicts
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
Standard VI(B): Conflicts of Interest - Priority of Transactions
Investment transactions for clients and employers must have priority over investment transactions in which member/candidate is beneficial owner
Standard VI(C): Conflict of Interest - Referral Fees
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
Standard VII(B): Reference to CFA Institute, CFA designation, and program
Must not misrepresent or exaggerate the meaning or implications of membership in CFAI, holding the CFA designation, or candidacy in the CFA program
