LM:2 Code Of Ethics & Standards Of Professional Conduct Flashcards

1
Q

What are the 7 standards of professional conduct?

A
  1. Individual Professionalism
  2. Integrity to capital markets
  3. Duties to clients
  4. Duties to employers
  5. Investment analysis, recommendation, & actions
  6. Conflicts of interest
  7. Responsibilities as a CFA institute member or CFA candidate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the 6 code of ethics for members or candidates of CFA program?

A
  1. Act with integrity, competence, diligence respect, and ethics with clients and others
  2. Place integrity & interest of client above self
  3. Use reasonable care & exercise independence when engaging in professional activities
  4. Practice & encourage others to practice in professional & ethical manner
  5. Promote the integrity of capital markets for benefit of society
  6. Maintain & improve self & others professional competence
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the 4-sub standards to professionalism?

A

A. Knowledge of law
B. Independence & objectivity
C. Misrepresentation
D. Misconduct

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the 2 sub standards to integrity of capital markets?

A

A. Material non-public information
B. Market manipulation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the 5 sub standards to duties to clients?

A

A. Loyalty, prudence, & care
B. Fair dealing
C. Suitability
D. Performance presentation
E. Preservation of confidentiality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the 3 exceptions to preservation of confidentiality to clients?

A
  1. Illegal activities on part of client or prospective client
  2. Disclosure required by law
  3. Client permits disclosure of information
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the 2 subsections of suitability?

A
  1. Advisory relationship musts
  2. Must adhere to specific mandate or strategy of portfolio
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the 3 rules to advisory relationship musts?

A
  1. Make reasonable inquire into clients investment experience, risk & return objectives, and financial constraints
  2. Determine investment is suitable based on clients financial situation, written objectives mandates, and constraints
  3. Judge suitability of investments in context of clients total portfolio
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the 3 sub standards to duties to employers?

A

A. Loyalty
B. Additional compensation agreements
C. responsibilities of supervisors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the 3 sub standards to duties to investment analysis, recommendation, & action?

A

A. Diligence & reasonable basis
B. Communication with clients
C. Record retention

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the 2 musts for substandard of diligence and reasonable basis?

A
  1. Exercise diligence, independence, & thoroughness in investment process
  2. Have reasonable basis for investment analysis, with research & investigation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the 4 musts for substandard of communication with clients & prospective clients? DDRD

A
  1. Disclose general principles & processes they use for investment analysis, portfolio construction, etc.
  2. Disclose to clients significant limitations and risk associated with investment processes.
  3. Reasonable judgement in identifying important factors for investment analysis, and communicate it.
  4. Distinguish between fact & opinion in investment analysis & recommendations
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the 3 sub-standards to conflicts of interest?

A

A. Disclosure of conflicts
B. Priority of transactions
C. Referral fees

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the 2 sub standards of responsibilities as a CFA institute member or candidate?

A
  1. Conduct as participants in CFA institute programs
  2. Reference to CFA institute designation & program
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Describe conduct as participants in CFA institute program and reference to CFA institute designation & program?

A
  • conduct as participants in CFA institute program: not engage in conduct that compromises the reputation or integrity of CFA institute or designation
  • reference to CFA institute designation & program: must not misrepresent or exaggerate the meaning or implications of membership, designation, & candidacy towards the CFA institute
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

The standards of practice handbook provides guidance:

A. Regarding penalties incurred as a result of ethical violations
B. To which all CFA institute members & candidates must adhere
C. Thorough explanatory material & examples intended to be all inclusive

A

B. To which all CFA institute members & candidates must adhere.

17
Q

Who does the broker commissions benefit, and what are they used for?

A

they benefit the client and should be commensurate with the value of the brokerage and research services received.

18
Q

What is a directed brokerage?

A

Directed brokerage is when a client will direct a manager to use the clients brokerage to purchase goods or services for them

19
Q

What is mosaic theory?

A

The use of material and non-material public information in an analysis

20
Q

Are client allowed to compensate portfolio managers for any extra return than expected?

A

Yes as long as the portfolio manager obtains permission from her employer prior to accepting the compensation agreement

21
Q

What is a composite?

A

Aggregation of one or more portfolios managers according to a similar investment mandate, objective, or strategy.

22
Q

Do members and candidates have to disclose civil litigations, what are civil litigations ?

A

Yes they do, must disclose on all matters that question their professional conduct

Civil Litigation: where two or more parties are seeking monetary damages or a specific performance.

23
Q

What are the 3 rules to misrepresentation?

A
  1. Can’t guarantee performance unless bank or insurance company
  2. Plagiarism is prohibited
  3. members & candidates share a responsibility for accuracy of materials that pertain to third party’s capabilities, services, and products.
24
Q

Are acts of civil disobedience based on personal beliefs a violation of conduct? Eg. Protesting peacefully and you get arrested.

A

No acts of civil disobedience based on personal beliefs is not a violation of this standard