Ethics and Investment Professionalism Flashcards
What is the CFA Code of Ethics (6)
- Act in an ethical manner.
- Integrity is paramount and clients always come first.
- Use reasonable care. Be independent.
- Be a credit to the investment profession.
- Promote the global capital markets.
- Be competent.
Why is ethical behaviour important?
builds trust in:
- financial markets
- investment professionals
- other stakeholders
- regulators
Standards of Professional Conduct:
1. Professionalism
a) knowledge of the law
b) independence and objectivity
c) misrepresentations
d) misconduct
Standards of Professional Conduct:
2. Integrity of Capital Markets
a) material non-public information
b) market manipulation
Standards of Professional Conduct:
3. Duties to Clients
a) loyalty, prudence, and care
b) fair dealing
c) suitability
d) performance presentation
e) preservation of confidentiality
Standards of Professional Conduct:
4. Duties to Employers
a) loyalty
b) additional compensation arrangements
c) responsibilities of supervisors
Standards of Professional Conduct:
5. Investment analysis, Recommendations, and Actions
a) diligence and reasonable basis
b) communications with clients
c) records
Standards of Professional Conduct:
6. Conflicts of Interest
a) disclosure
b) priority of transactions
c) referral fees
Standards of Professional Conduct:
7. Responsibilities as a CFA Institute Member or CFA Candidate
a) conduct as members and candidates
b) reference to the institute, designation, and the CFA programme
In the event of a conflict of law/rule/regulation, an individual should comply with ___
the more strict one
To maintain independence and objectivity, and avoid bribery/pressure, employees should:
- pay for own transport, accommodation, and costs
- avoid issuer regularly acting as host
- decline lavish gifts
Employees should avoid misrepresenting qualifications, services provided, performance records, returns on a risky investment, by:
keeping record of sources used, acknowledge quotations, and site sources of statistics
Supervisors should have compliance procedures in place, including:
- 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
Which standard is the following in relation to:
‘Understand and comply with all applicable laws, rules, and regulations’
IA - knowledge of the law
Professionalism
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’
IB - independence and objectivity
Professionalism
Which standard is the following in relation to:
‘Do not knowingly make any misrepresentation relating to investments analysis, recommendations, actions or professional activities’
IC - misrepresentation
Professionalism
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’
ID - misconduct
Professionalism
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’
IIA - material non-public information
Integrity of Capital Markets
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’
IIB - market manipulation
Integrity of Capital Markets
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’
IIIA - loyalty, prudence, and care
Duties to Clients
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’
IIIB - fair dealing
Duties to Clients
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’
IIIC - suitability
Duties to Clients
Which standard is the following in relation to:
‘When communicating investment performance information, ensure it is fair, accurate, and complete’
IIID - performance presentation
Duties to Clients
Which standard is the following in relation to:
‘Keep information about current, former and prospective clients confidential’
IIIE - preservation of confidentiality
Duties to Clients
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’
IVA - loyalty
Duties to Employers
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’
IVB
Duties to Employers
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’
IVC- responsibilities of supervisors
Duties to Employers
Which standard is the following in relation to:
‘Exercise diligence, independence, and thoroughness in analysing investment recommendations and taking investment actions’
VA - diligence and reasonable basis
Investment Analysis, Recommendations, and Actions
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’
VB - communication with clients
Investment Analysis, Recommendations, and Actions
Which standard is the following in relation to:
‘Develop and maintain appropriate records to support analysis, recommendations, and actions’
VC - record retention
Investment Analysis, Recommendations, and Actions
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’
VIA - disclosure of conflicts
Conflicts of Interest
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’
VIB - priority transactions
Conflicts of Interest
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’
VIC - referral fees
Conflicts of Interest
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’
VIIA - conduct as members and candidates in the CFA programs
Responsibilities as a CFA Member or Candidate
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’
VIIB - reference to CFA institute, the CFA designation and the CFA program
Responsibilities as a CFA Member or Candidate
