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CFA Level I > Vol. 6 LM2 Code of Ethics > Flashcards

Vol. 6 LM2 Code of Ethics Flashcards

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1
Q

document

provides guidance to the people who grapple with real ethical dilemmas in the investment profession on a daily basis

p 293

A

Standards of Practice Handbook

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2
Q

Describe

Code of Ethics of the Handbook

p 294

A

The Code contains high-level aspirational ethical principles that drive members and candidates to create a positive and reputable investment profession

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3
Q

The Standards of Professional Conduct contain …

p 294

A

practical ethical principles of conduct that members and members and candidates must follow to achieve the broader industry expectations

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4
Q

In 1992, CFA Institute added the standard addressing …

p 294

A

performance presentation to the existing list of standards

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5
Q

Concept

is the fundamental element of the ethics education effort of CFA Institute

p 294

A

Standards of Practice Handbook

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6
Q

Concept

examples in this section are meant to illustrate how the standard applies to hypothetical but factual situations

p 294

A

“Application of the Standard” sections

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7
Q

CFA Institute

Mission

p 295

A

To lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society

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8
Q

CFA Institute

New Standard Regarding Responsibilties of Supervisors [IV(C)]

p 296

A

Members and Candidates must make reasonable efforts to ensure that
anyone subject to their supervision or authority complies with applicable
laws, rules, regulations, and the Code and Standards.

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9
Q

Standard for Communication with Clients and

Prospective Clients [V(B)]

Given the constant development of new and exotic financial instruments and strategies, the standard regarding communicating with clients now includes

p 296

A
  • an implicit requirement to discuss the risks and limitations of recommendations being made to clients.
  • The new principle and related guidance take into account the fact that levels of disclosure will differ between products and services.
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10
Q

CFA Institute

Standard VII(A)

p 296

A

Members and Candidates must not engage in any conduct that compromises the reputation or integrity of CFA Institute or the CFA designation or the integrity, validity, or security of CFA Institute programs.

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11
Q

Concept

This program in conjunction with this body is responsible for enforcement of the Code and Standards

p 297

A

Professional Conduct Program (PCP) in conjunction with the Disciplinary Review Committee (DRC)

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12
Q

Concept

is a volunteer committee of CFA charterholders who serve on panels to review conduct and partner with Professional Conduct

p 297

A

Disciplinary Review Committee

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13
Q

Describe

Asset Manage Code of Professional Conduct

p 298

A

is designed, in part, to help asset managers comply with the regulations mandating codes of ethics for investment advisers

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14
Q

How do the Code and Standards, and the Asset Manager Code

p 298

A
  • Code and Standards are aimed at individuals
  • Asset Manager Code is aimed at investment firms
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15
Q

List

Asset Manager Code provides practical guidelines for asset managers in six areas

p 298

A
  1. loyalty to clients
  2. investment process
  3. trading
  4. compliance
  5. performance evaluation
  6. disclosure
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16
Q

Describe

Standards of Practice Council (SPC)

p 298

A

a group consisting of CFA charterholder volunteers from many different countries, is charged with maintaining and the interpreting the Code and Standards and ensuring that they are effective

17
Q

List

The SPC continually evaluates the Code and Standards to ensure that they have these qualities

p 299

A
  • representative of high standards of professional conduct
  • relevant to the changing nature of the investment profession
  • globally applicable
  • sufficiently comprehensive, practical and specific
  • enforceable
  • testable for the CFA Program
18
Q

Standards of Professional Conduct

domains of professionalism

p 304

A
  • knowledge of the law
  • independence and objectivity
  • misrepresentation
  • misconduct
19
Q

Standard of Professional Conduct

domains of Integrity of Capital Markets

p 305

A
  • Material Nonpublic Information
  • Market Manipulation
20
Q

Standard of Professional Conduct

domains Duties to Clients

p 305

A
  • Loyalty, Prudence, and Care
  • Fair Dealing
  • Suitability
  • Performance Presentation
  • Preservation of Confidentiality
21
Q

Suitability

When Members and Candidates are in an advisory relationship with a client, they must:

p 305

A
  1. Make a reasonable inquiry into a client’s or prospective client’s investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation
  2. Determine that an investment is suitable to the client’s financial situation and consistent with the client’s written objectives, mandates and constraints
  3. Judge the suitability of investmenets in the context of the client’s total portfolio
22
Q

Preservation of Confidentiality

Members and Candidates must keep information about current, former, and prospective clients confidential unless:

p 306

A
  1. The information concerns illegal activities on the part of the client or prospective client
  2. Disclosure is required by law, or
  3. The client or prospective client permits disclosure of the information
23
Q

Standard of Professional Conduct

domains of Duties to Employers

p 306

A
  1. Loyalty
  2. Additional Compensation Arrangements
  3. Responsibilities of Supervisors
24
Q

Which section of Code of Ethics

diligence and reasonable basis

p 306

A

Section V. Investment Analysis, Recommendations, and Actions

25
Q

Which section of the Code of Ethics

Members and Candidates must make reasonable efforts to ensure that
anyone subject to their supervision or authority complies with applicable
laws, rules, regulations, and the Code and Standards.

p 306

A

Section IV. Duties to Employers

26
Q

Which section of the Code of Ethics

Members and Candidates must not accept gifts, benefits, compensation,
or consideration that competes with or might reasonably be expected
to create a conflict of interest with their employer’s interest unless they
obtain written consent from all parties involved.

p 306

A

Section IV. Duties to Employers

27
Q

Which section of the Code of Ethics

In matters related to their employment, Members and Candidates must
act for the benefit of their employer and not deprive their employer of
the advantage of their skills and abilities, divulge confidential informa-
tion, or otherwise cause harm to their employer.

P 306

A

Section IV. Duties to Employers

28
Q

Which section of the Code of Ethics

E. Members and Candidates must keep information about current, former, and prospective clients confidential unless:
1. The information concerns illegal activities on the part of the client or prospective client,

p 306

A

Section III.E Duties to Clients - Preservation of Confidentiality

29
Q

Which section of the Code of Ethics

Members and Candidates must deal fairly and objectively with all clients
when providing investment analysis, making investment recommen-
dations, taking investment action, or engaging in other professional
activities.

p 305

A

Section III.C Duties to Clients - Suitability

30
Q

Which section of the Code of Ethics

Judge the suitability of investments in the context of the client’s
total portfolio.

p 305

A

Section III.C Duties to Clients - Suitability

31
Q

Describe

Additional Requirement under the Standard for Communication with Clients and Prospective Clients [V(B)]

p 296

A

Disclose to clients and prospective clients significant limitations and risks
associated with the investment process.

32
Q

What happens next?

When an inquiry is initiated

p 297

A

the Professional Conduct staff conducts an investigation that may include requesting a written explanation from the member or candidate; interviewing the member or candidate, complaining parties, and third parties; and collecting documents and records relevant to the investigation.

CFA Level I (64 decks)

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