Reading 3.1 Standard 1: Professionalism Flashcards
List the Guidance of the Professionalism standard as it applies to Misconduct.
Addresses all conduct that reflects poorly on the professional integrity, good reputation, or competence of members and candidates.
Conduct that damages trustworthiness or competence may include behavior that, although not illegal, nevertheless negatively affects one’s ability to perform his or her responsibilities.
The absence of appropriate conduct or the lack of sufficient effort may be a violation of this standard.
Describe the Professionalism standard as it applies to Independence and Objectivity.
Members and candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. Members and candidates must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity.
What actions should be taken in disassociating from an activity that violates the Codes and Standards?
Document the violation and urge the firm to attempt to persuade the perpetrator(s) to cease such conduct.
What is the “more strict” law rule?
The law or regulation that imposes greater restrictions on the action of the member or candidate calls for the member or candidate to exert a greater degree of action that protects the interests of investors.
List the Guidance of the Professionalism standard as it applies to Misrepresentation.
A misrepresentation is any untrue statement or omission of a fact or any statement that is otherwise false or misleading.
Must not knowingly omit or misrepresent information or give a false impression of a firm, organization, or security in oral representations, advertising, electronic communications, or written materials.
Regularly monitor materials posted on websites to ensure that they contain current information and take all reasonable precautions to protect the site’s integrity and security.
Should not guarantee clients any specific return on volatile investments.
Members and candidates should encourage their firms to adopt what policies and procedures to support the principles of the Misconduct standard?
Code of Ethics
List of Potential Violations
Check references of potential employees to ensure that they are of good character and not ineligible to work in the investment industry because of past infractions of the law.
Describe the Professionalism standard as it applies to Misconduct.
Members and candidates must 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.
From what sources should information be gathered in doing due diligence of financial research and analysis?
Public disclosure documents (such as proxy statements, annual reports, and other regulatory filings)
Company management and investor-relations personnel
Suppliers
Customers
Competitors
Other relevant sources
Describe the key elements of a firewall set up between the investment banking and research functions.
Separate reporting structures for personnel on the research side and personnel on the investment banking side.
Compensation arrangements that minimize pressures on research analysts and reward objectivity and accuracy.
Define Distribution Area Laws.
Members and candidates should make reasonable efforts to understand the applicable laws—both country and regional—for the countries and regions where their investment products are developed and are most likely to be distributed to clients.
Describe the Professionalism standard as it applies to Knowledge of the Law.
Members and candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities.
Describe the Professionalism standard as it applies to Misrepresentation.
Members and candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.
When is it advisable to seek legal counsel?
When in doubt about the appropriate action to undertake, it is recommended to seek the advice of compliance personnel or legal counsel concerning legal requirements.
If a potential violation is being committed by a fellow employee, it may also be prudent to seek the advice of the firm’s compliance department or legal counsel.
List the Guidance of the Professionalism standard as it applies to Independence and Objectivity on behalf of clients.
Avoid situations that could cause or be perceived to cause a loss of independence or objectivity.
Modest gifts and entertainment are acceptable.
Distinguish gifts given by entities seeking to influence.
Disclose to employers those benefits offered or previously accepted.
Maintain independence and objectivity when preparing reports, making investment recommendations, and taking investment actions.
Evaluate the effect of corporate financial support on independence and whether objectivity will be perceived to be compromised.
List the Guidance of the Professionalism standard as it applies to Knowledge of Law.
Understand the applicable laws and regulations of the countries and jurisdictions.
Comply with the laws and regulations that directly govern their professional activities and resulting outcomes and that protect the interests of the clients.
Know their firm’s policies and procedures for accessing compliance guidance.
Remain vigilant in maintaining knowledge of the requirements for their professional activities.
