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IMC Unit 1 > Ethics and Investment Professionalism > Flashcards

Ethics and Investment Professionalism Flashcards

1
Q

What is the CFA Code of Ethics (6)

A
  1. Act in an ethical manner.
  2. Integrity is paramount and clients always come first.
  3. Use reasonable care. Be independent.
  4. Be a credit to the investment profession.
  5. Promote the global capital markets.
  6. Be competent.
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2
Q

Why is ethical behaviour important?

A

builds trust in:
- financial markets
- investment professionals
- other stakeholders
- regulators

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3
Q

Standards of Professional Conduct:
1. Professionalism

A

a) knowledge of the law
b) independence and objectivity
c) misrepresentations
d) misconduct

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4
Q

Standards of Professional Conduct:
2. Integrity of Capital Markets

A

a) material non-public information
b) market manipulation

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5
Q

Standards of Professional Conduct:
3. Duties to Clients

A

a) loyalty, prudence, and care
b) fair dealing
c) suitability
d) performance presentation
e) preservation of confidentiality

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6
Q

Standards of Professional Conduct:
4. Duties to Employers

A

a) loyalty
b) additional compensation arrangements
c) responsibilities of supervisors

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7
Q

Standards of Professional Conduct:
5. Investment analysis, Recommendations, and Actions

A

a) diligence and reasonable basis
b) communications with clients
c) records

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8
Q

Standards of Professional Conduct:
6. Conflicts of Interest

A

a) disclosure
b) priority of transactions
c) referral fees

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9
Q

Standards of Professional Conduct:
7. Responsibilities as a CFA Institute Member or CFA Candidate

A

a) conduct as members and candidates
b) reference to the institute, designation, and the CFA programme

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10
Q

In the event of a conflict of law/rule/regulation, an individual should comply with ___

A

the more strict one

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11
Q

To maintain independence and objectivity, and avoid bribery/pressure, employees should:

A
  • pay for own transport, accommodation, and costs
  • avoid issuer regularly acting as host
  • decline lavish gifts
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12
Q

Employees should avoid misrepresenting qualifications, services provided, performance records, returns on a risky investment, by:

A

keeping record of sources used, acknowledge quotations, and site sources of statistics

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13
Q

Supervisors should have compliance procedures in place, including:

A
  • clearly written and accessible
  • outline permissible conduct
  • implement a system of checks
  • designate a compliance office
  • outline procedure for reporting violations
  • define hierarchy of supervision and assign duties to supervisors
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14
Q

Which standard is the following in relation to:
‘Understand and comply with all applicable laws, rules, and regulations’

A

IA - knowledge of the law
Professionalism

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15
Q

Which standard is the following in relation to:
‘Achieve and maintain independence and objectivity. Do not offer, solicit, or accept any gift, benefit, compensation, or consideration that comprises independence and objectivity’

A

IB - independence and objectivity
Professionalism

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16
Q

Which standard is the following in relation to:
‘Do not knowingly make any misrepresentation relating to investments analysis, recommendations, actions or professional activities’

A

IC - misrepresentation
Professionalism

17
Q

Which standard is the following in relation to:
‘Do 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’

A

ID - misconduct
Professionalism

18
Q

Which standard is the following in relation to:
‘Do not act or cause others to act on material non-public information that could affect the value of an investment’

A

IIA - material non-public information
Integrity of Capital Markets

19
Q

Which standard is the following in relation to:
‘Do not engage in practices that distort prices or artificially inflate trading volume with the intention to mislead market participants’

A

IIB - market manipulation
Integrity of Capital Markets

20
Q

Which standard is the following in relation to:
‘Act for the benefit of clients and place your clients’ interests before your employer’s or your own interests’

A

IIIA - loyalty, prudence, and care
Duties to Clients

21
Q

Which standard is the following in relation to:
‘Do not favour one client above any other when disseminating recommendations or taking investment action, or engaging in other professional activities’

A

IIIB - fair dealing
Duties to Clients

22
Q

Which standard is the following in relation to:
‘Make only investment recommendations and take only investment actions that are consistent with the stated objectives and constraints of the portfolio’

A

IIIC - suitability
Duties to Clients

23
Q

Which standard is the following in relation to:
‘When communicating investment performance information, ensure it is fair, accurate, and complete’

A

IIID - performance presentation
Duties to Clients

24
Q

Which standard is the following in relation to:
‘Keep information about current, former and prospective clients confidential’

A

IIIE - preservation of confidentiality
Duties to Clients

25
Q

Which standard is the following in relation to:
‘Act for the benefit of your employer and not deprive them of the benefit of your skills and abilities, divulge confidential information or otherwise cause harm’

A

IVA - loyalty
Duties to Employers

26
Q

Which standard is the following in relation to:
‘Do not accept gifts, benefits, compensation or consideration (that creates a conflict of interest with your employer’s interests) unless with WRITTEN CONSENT from all parties involved’

A

IVB
Duties to Employers

27
Q

Which standard is the following in relation to:
‘Ensure anyone subject to your supervision or authority complies with applicable laws, rules, regulations, and the Code and Standards’

A

IVC- responsibilities of supervisors
Duties to Employers

28
Q

Which standard is the following in relation to:
‘Exercise diligence, independence, and thoroughness in analysing investment recommendations and taking investment actions’

A

VA - diligence and reasonable basis
Investment Analysis, Recommendations, and Actions

29
Q

Which standard is the following in relation to:
‘Provide information to clients on the basic characteristics of an investment, which are the key factors supporting a recommendation, and differentiate between opinion and fact’

A

VB - communication with clients
Investment Analysis, Recommendations, and Actions

30
Q

Which standard is the following in relation to:
‘Develop and maintain appropriate records to support analysis, recommendations, and actions’

A

VC - record retention
Investment Analysis, Recommendations, and Actions

31
Q

Which standard is the following in relation to:
‘Make full and fair disclosure of all matters that could impair independence and objectivity or conflict with duties to clients, prospective clients and employer’

A

VIA - disclosure of conflicts
Conflicts of Interest

32
Q

Which standard is the following in relation to:
‘Transaction for clients and employers have priority over transactions in which a member is the beneficial owner’

A

VIB - priority transactions
Conflicts of Interest

33
Q

Which standard is the following in relation to:
‘Disclose to employer, clients, and prospective clients any compensation, consideration or benefit received from/paid to others for the recommendation of products or services’

A

VIC - referral fees
Conflicts of Interest

34
Q

Which standard is the following in relation to:
‘Do not compromise the reputation or integrity of the CFA Institute, the CFA designation or the CFA Institute Programes’

A

VIIA - conduct as members and candidates in the CFA programs
Responsibilities as a CFA Member or Candidate

35
Q

Which standard is the following in relation to:
‘Do not misrepresent or exaggerate the meaning or implications of membership in the CFA Institute, holding the CFA designation or candidacy in the CFA Program’

A

VIIB - reference to CFA institute, the CFA designation and the CFA program
Responsibilities as a CFA Member or Candidate

IMC Unit 1 (6 decks)

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