Reading 2 Code of Ethics

Question 1

List the areas of Integrity of Capital Markets (II) that are part of the CFA Institute Standards of Professional Conduct.

Answer 1

A. Material Nonpublic Information

B. Market Manipulation

Question 2

List the areas of Duties to Clients (III) that are part of the CFA Institute Standards of Professional Conduct.

Answer 2

A. Loyalty, Prudence, and Care

B. Fair Dealing

C. Suitability

D. Performance Presentation

E. Preservation of Confidentiality

Question 3

List the areas of Investment Analysis, Recommendations, and Actions (V) that are part of the CFA Institute Standards of Professional Conduct.

Answer 3

A. Diligence and Reasonable Basis

B. Communication with Clients and Prospective Clients

C. Record Retention

Question 4

Describe the Code of Ethics members of the CFA Institute must subscribe to.

Answer 4

Act with integrity, competence, diligence, and respect.

Place the integrity of the investment profession and the interests of clients above their own.

Use reasonable care and exercise independent professional judgment.

Practice and encourage others to practice in a professional and ethical manner.

Promote the integrity and viability of the global capital markets for the ultimate benefit of society.

Maintain and improve their professional competence.

Question 5

List the areas of Conflicts of Interest (VI) that are part of the CFA Institute Standards of Professional Conduct.

Answer 5

A. Disclosure of Conflicts

B. Priority of Transactions

C. Referral Fees

Question 6

Name the 7 areas of the Standards of Professional Conduct.

Answer 6

I. Professionalism

II. Integrity of Capital Markets

III. Duties to Clients

IV. Duties to Employers

V. Investment Analysis, Recommendations, and Actions

VI. Conflicts of Interest

VII. Responsibilities as a CFA Institute Member or CFA Candidate

Question 7

Name the specific practical guidelines for asset managers provided in the Asset Manager Code.

Answer 7

Loyalty to clients

The investment process

Trading

Compliance

Performance evaluation

Disclosure

Question 8

List the areas of Responsibilities as a CFA Institute Member or CFA Candidate (VII) that are part of the CFA Institute Standards of Professional Conduct.

Answer 8

A. Conduct as members and candidates in the CFA program

B. Reference to CFA Institute, the CFA Designation, and the CFA Program

Question 9

List the 3 possible outcomes of a Professional Conduct inquiry.

Answer 9

Take no disciplinary action.

Issue a cautionary letter.

Continue proceedings to discipline the member or candidate.

Question 10

Sanctions imposed by CFA Institute may have what significant consequences?

Answer 10

Public censure

Suspension of membership and use of the CFA designation

Revocation of the CFA charter

Question 11

CFAI Enforcement

Answer 11

The CFA Institute Board of Governors maintains oversight and responsibility for the Professional Conduct Program (PCP), which, in conjunction with the Disciplinary Review Committee (DRC), is responsible for enforcement of the Code and Standards.

Question 12

List the areas of Professionalism (I) that are part of the CFA Institute Standards of Professional Conduct.

Answer 12

A. Knowledge of the Law

B. Independence and Objectivity

C. Misrepresentation

D. Misconduct

Question 13

List the areas of Duties to Employers (IV) that are part of the CFA Institute Standards of Professional Conduct.

Answer 13

A. Loyalty

B. Additional Compensation Arrangements

C. Responsibilities of Supervisors