Ethics

Question 1

Conflicts of interest

Answer 1

The code says the best course is to avoid conflicts of interest. When given a question where you can choose between avoiding conflict or disclosing it, you choose to avoid it

Question 2

Local laws and the code

Answer 2

members and candidates must adhere to the higher standard set by the Code and Standards if local applicable law is less strict

Question 3

Misrepresentations

Answer 3

Must take steps to present a fair, accurate, and complete presentation of performance. Sometimes true is not fair, accurate and complete.

although Michelieu’s statement about the total return of his clients’ accounts on average may be technically true, it is misleading because the majority of the gain resulted from one client’s large position taken against Michelieu’s advice

Question 4

2 primary reasons for disclosing referral fees

Answer 4

allow clients and employers to evaluate the full cost of the services.

help the client evaluate any possible partiality shown in the recommendation of services.

Question 5

Rules on directed trading

Answer 5

Directed trading, or exclusive trading with a broker, must be disclosed to clients. You can trade exclusively through a broker as long as you receives best price and execution on the trades or receives a written statement from new clients that she is not to seek best price and execution and that they are aware of the consequence for their accounts. either way must be disclosed.

Question 6

clients vs non clients

Answer 6

essential clients come first.

i.e: ensure that any change in an investment recommendation is first distributed to her asset management clients before any newsletter recipients, who are not necessarily clients (that is, they receive the newsletter for free from a third party distribution list).

Question 7

Be weary of the order of events

Answer 7

i.e. if a firm does not disclose a referral fee, before whatever service agreement is made with the party this disclosure should have been made to, accepting the fee is the violation, over the non-disclosure piece.

Question 8

Third party research

Answer 8

Members and candidates can rely on third-party research but must make reasonable and diligent efforts to determine that such research is sound. If McDermott undertakes due diligence efforts on a regular basis to ensure that the research produced by the large firm is objective and reasonably based, McDermott can rely on that research when making investment recommendations to clients.

Question 9

Non public info as it relates to market making

Answer 9

The Standard recommends that market makers remain passive when in possession of material nonpublic information. this means that can continue making markets, which is a form of prop trading.

Question 10

Under the code of loyalty when switching firms

Answer 10

Soliciting current clients to leave with you is strictly prohibited