LM:2 Code Of Ethics & Standards Of Professional Conduct Flashcards
What are the 7 standards of professional conduct?
- Individual Professionalism
- Integrity to capital markets
- Duties to clients
- Duties to employers
- Investment analysis, recommendation, & actions
- Conflicts of interest
- Responsibilities as a CFA institute member or CFA candidate
What are the 6 code of ethics for members or candidates of CFA program?
- Act with integrity, competence, diligence respect, and ethics with clients and others
- Place integrity & interest of client above self
- Use reasonable care & exercise independence when engaging in professional activities
- Practice & encourage others to practice in professional & ethical manner
- Promote the integrity of capital markets for benefit of society
- Maintain & improve self & others professional competence
What are the 4-sub standards to professionalism?
A. Knowledge of law
B. Independence & objectivity
C. Misrepresentation
D. Misconduct
What are the 2 sub standards to integrity of capital markets?
A. Material non-public information
B. Market manipulation
What are the 5 sub standards to duties to clients?
A. Loyalty, prudence, & care
B. Fair dealing
C. Suitability
D. Performance presentation
E. Preservation of confidentiality
What are the 3 exceptions to preservation of confidentiality to clients?
- Illegal activities on part of client or prospective client
- Disclosure required by law
- Client permits disclosure of information
What are the 2 subsections of suitability?
- Advisory relationship musts
- Must adhere to specific mandate or strategy of portfolio
What are the 3 rules to advisory relationship musts?
- Make reasonable inquire into clients investment experience, risk & return objectives, and financial constraints
- Determine investment is suitable based on clients financial situation, written objectives mandates, and constraints
- Judge suitability of investments in context of clients total portfolio
What are the 3 sub standards to duties to employers?
A. Loyalty
B. Additional compensation agreements
C. responsibilities of supervisors
What are the 3 sub standards to duties to investment analysis, recommendation, & action?
A. Diligence & reasonable basis
B. Communication with clients
C. Record retention
What are the 2 musts for substandard of diligence and reasonable basis?
- Exercise diligence, independence, & thoroughness in investment process
- Have reasonable basis for investment analysis, with research & investigation
What are the 4 musts for substandard of communication with clients & prospective clients? DDRD
- Disclose general principles & processes they use for investment analysis, portfolio construction, etc.
- Disclose to clients significant limitations and risk associated with investment processes.
- Reasonable judgement in identifying important factors for investment analysis, and communicate it.
- Distinguish between fact & opinion in investment analysis & recommendations
What are the 3 sub-standards to conflicts of interest?
A. Disclosure of conflicts
B. Priority of transactions
C. Referral fees
What are the 2 sub standards of responsibilities as a CFA institute member or candidate?
- Conduct as participants in CFA institute programs
- Reference to CFA institute designation & program
Describe conduct as participants in CFA institute program and reference to CFA institute designation & program?
- 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