Ethics & Trust In The Investment Profession

Question 1

What is a profession?

Answer 1

community that has specialized knowledge & skills, commitment to serve others, and a shared code of ethics

Question 2

Describe the 3 steps to CFA Institute professional conduct program.

Answer 2

Grounds for discipline: any act which violates the code & standards

Investigation by Designated Office (DO): DO conclude investigation with no disciplinary action. If disciplinary action you can accept it or go to hearing

Hearing: member rejects sanction, case against member prepared to take place in front of hearing panel of 3 or more members (aka DRC (Disciplinary Review Committee)

Question 3

What is ethics?

Answer 3

Ethics is study of making good decisions

Question 4

What does ethics encompass?

Answer 4

Encompasses set of moral principals & rules of conduct that provide guidance for our behavior

Question 5

What is code of ethics?

Answer 5

Publicly communicates established principles & expect behavior of its members

Question 6

What is standards of conduct?

Answer 6

benchmark for minimally acceptable behavior of community members and can help clarify code of ethics

Question 7

What are laws & regulations?

Answer 7

Rules of conduct defined by government or related entity’s

Question 8

What are the 3 challenges to ethical behavior? OSF

Answer 8

• overconfidence
• situational influences
• focusing on immediate instead of long-term outcomes or consequences of a decision

Question 9

What are situational influences?

Answer 9

External factors that may shape our behavior

Question 10

Describe the 4 step approach to ethical decision making.

Answer 10

1. Identify: relevant facts, stakeholders, conflicts of interest
2. Consider: situational influences, alternative actions, etc.
3. Decide & act on it.
4. Reflect weather the outcome was anticipated

Question 11

Decision makers who use a compliance approach are most likely to:

a. Avoid the situational behaviors
b. Oversimplify decision making
c. Consider more factors when using an ethical decision-making approach

Answer 11

B. Oversimplify decision making

Question 12

To maintain trust, the investment management profession must be interdependent with:

A. Regulators
B. Employers
C. Investment firms

Answer 12

C. Investment firms

Investment firms and investment professionals must be interdependent to maintain trust

Question 13

When an ethical dilemma occurs, an investment professional should most likely first raise the issue with a:

A. Mentor outside the firm
B. Professional body’s hotline
C. Senior individual in the firm

Answer 13

C. Senior individual in the firm

some businesses may be required to be confidential inside a business so best to stay with in the business if possible

Question 14

What is the 4 step approach to ethical decision making framework?

Answer 14

1. Identify
2. Consider
3. Decide & Act
4. Reflect

Question 15

Where are the 5 sources a professional conduct inquire comes from? MWMPC

Answer 15

• members & candidates must self disclose on all matters the question their professional conduct
• written complaints received by professional conduct staff can warrant an investigation
• media, regulator notices, or another public source
• proctors on testing days
• CFA institute self conducting analysis

Question 16

What are 3 possible sanctions imposed if the code & standards of CFA institute are broken? PSR

Answer 16

• public censure (formal statement of disapproval)
• suspension of membership and use of CFA designation
• revocation of the CFA charter

Question 17

What are the 5 steps of CFA Institute Professional Conduct Program?

Answer 17

1. once PCP staff become aware of potential violation, they may initiate formal inquiry
2. In the course of their inquiry, PCP staff will request a written explanation from the member or candidate and gather any other relevant information.
3. Based on the PCP staff’s findings, a Designated Officer may either conclude that no disciplinary action is necessary, issue a cautionary letter, or propose a disciplinary sanction.
4. If a disciplinary sanction is proposed, the member or candidate may either accept it or ask for the case to be heard by a panel of 3 or more Disciplinary Review Committee (DRC) members.
5. If requested, the DRC panel will determine what, if any, sanction is appropriate. Sanctions may range from public censure to the revocation of a member’s charter.