Volume 6 Flashcards
What does ethics encompass, morale/ethical principles and ethical conduct?
What is a code of ethics, standards of conduct and violations
Describe ethics and professionalism
Describe professionalism within investment management
How do professions promote trust 1-6
How do professions promote trust 7-10
What are the expectations of a profession
What do ethics in investment industry enhance? Why is trust in important within investments?
What are the three challenges to ethical conduct?
Difference between legal and ethical standards?
Explain ethical decision making frameworks
Describe the professional conduct programme and who enforces the codes and standards
What do conduct inquires result from?
What happens after an inquiry is initiated and what may it result in?
What are the potential sanctions and describe how the code and standards are adopted?
Asset manager code of professional conduct, Why do ethics matter and whose interests do they protect?
Code of ethics, act with…. and place the….?
Code of ethics, use reasonable……, Practice and….., promote the….., and Maintain and ……..?
Standards of professional conduct, 1 and 2?
Standards of professional conduct, 3,4,5,6,7?
Duties to, Duties to, Investment, Conflicts, Responsibilities
Professionalism: Knowledge of the law and guidance
Knowledge of law: C/S vs applicable laws, Participation in or association with violations by others
Knowledge of law: Investment products and applicable laws, Compliance
Professionalism: Independence and objectivity
Independence and objectivity: Guidance, Investment banking relationships
Independence and objectivity: Public companies, buy-side clients, Fund managers, credit rating agencies, Issuer-paid research
Indendence and objectivity: Travel funding, Performance measurement, Influence during manager selection process
Independence and objectivty: Recommended procedures for compliance
Professionalism: Misrepresentation and guidance for impact on investment practice
Misrepresentation: Guidance on performance reporting, omissions, social media and plagiarism
Misrepresentation: Guidance on plagiarism (cont), work completed for employer
Misrepresentation: Recommended procedures for compliance
Professionalism: Misconduct , guidance and recommended procedures for compliance
Integrity of capital markets: Material non-public information, material definition, test, non-public definition
Material non-public information: Mosiac theory, Social media, Using industry experts, Investment research reports
Material non-public information: recommended procedures for compliance
Material non-public information: recommended procedures for compliance (cont)
Integrity of capital markets: Market manipulation, what does it include and information-based and transaction-based manipulation?
Duties to clients: Loyalty, prudence and cares
Loyalty, prudence and care: Identifying the actual investment client, developing the clients portfolio, Soft commission policies
Loyalty, prudence and care: Recommended procedures for compliance (client approval and firm policies)
Duties to clients: Fair dealing
Fair dealing: investment recommendations and investment action
Fair dealing: Investment action (cont) and recommended procedures for compliance
Fair dealing: Recommended procedures for compliance (Allocations)
Duties to clients: Suitability
Suitability: Guidance and recommended procedures for compliance
Duties to clients: Performance presentation and guidance for compliance
Duties to clients: Preservation of confidentiality
Preservation of confidentiality: procedures for compliance
Duties to employers: Loyalty
Loyalty: employer responsibilities and independent practice, leaving an employer
Loyalty: Leaving an employer cont, whistle blowing and procedures for guidance
Duties to employer: Additional compensation agreements
Duties to employers: Responsibilities of supervisors
Responsibilities of supervisors: Compliance procedures and Inadequate procedures
Responsibilities of supervisors: Recomended procedures for compliance cont
Investment A, R and A: Diligence and reasonable basis, defining diligence and reasonable basis,
Diligence and reasonable basis: Quant orientated research, developing quant orientated techniques and selecting external advisors
Diligence and reasonable basis: Group research and procedures for compliance
Investment A, R and A: Communication with clients and prospective clients
Communication with clients and prospective clients: Different forms of communication, Identifying limitations of analysis, distinction between fact and opinion
Distinction Between Facts and Opinions
M/C may be in violation by failing to
identify limitations of statistically developed
projections ⇒ merely an estimate of future results
Investment A, R and A: Record retention
Record retention: Records are firm property, Local requirements, recommended procedures for compliance
Conflicts of Interest: Disclosure of conflicts
Disclosure of conflicts: To employers, to clients
Disclosure of conflicts: To clients, Conflicts with stock ownership and as director
Disclosure of conflicts: Procedures for compliance
Conflicts of interest: Priority of transactions
Priority of transactions: Impact on all beneficial accounts and recommended procedures for compliance (IPO, private placements, trade restriction, porting reqs)
Priority of transactions: Recomenned procedures for compliance, reporting reqs cont
Conflicts of interest: Referral fees
Responsibilities as a CFA Institute M/C: Conduct as a M/C in the CFA programme, Confidential info, additional restrictions and expressing opinions
Responsibilities as a CFA Institute M/C: Reference to CFA programme and CFA Membership requirements
Reference to CFA Institute, the CFA designation, and
the CFA Program: Using CFA designation, Referring to candidacy
Referring to Candidacy in the CFA Program
- never state/imply partial designation or
cite an expected completion date
- if you pass all 3 levels in consecutive
years, you can say so, but you can’t say it gives
you superior ability
⇒ Proper use of the CFA marks
- must be used only after a name or as an
adjective
- cannot be used as part of the name of a firm
Mission of GIPS and what 3 things is it meant to overcome
What is GIPS and its objectives
Who can claim compliance and who benefits
What are composites and definition of the firm?
Definition of discretion and Verification
What is the asset manager code, its goal and the advantages of it?
What are the 6 general principles of conduct?
The GIPS standards are for who?
What are they?
What are the ideals they are based on?
What are the benefits to investors?
Also enables reasonable comparisons among different investment management firms?
What are the benefits for investment management firms and what firms are within the scope?
What is a composite, a segregated account, limited distribution pooled account?
What are the 5 objectives of GIPS?
Verification is ….?
Local law conflicts with GIPS then what should firm do?
What is the definition of “firm” and “distinctive business unit”?
Definition of firm sets the boundaries for …?
This includes sub advisors that…?
What is the definition of discretion?
What is time weighted return?
If using TWR portfolios must be valued …?
Private market portfolios must be valued…?
Pooled funds must be valued … and when..?
If CFs are not large, sub period returns are not required.
What return method must be used?
What is the modified IRR approach?
For box-true vs estimated TWR what must be documented?
If a firm has control over external CFs, they may elect to present MWR for portfolios that…what?
When can returns not be annualised?
How should cash and cash equivalents be treated?
How are expenses and fees treated ?
What methodology are firms required to apply?
How does GIPS define FV?
If observable market price not available, should use in order 1,2,3,4?
Which types of accouts should be included in at least one composite?
When may non-fee paying accounts be included?
Composite TWR returns can be done in which 3 ways?
What is the aggregate return method?
Composite TWR but be calculated…?
For protfolios which have IPS that limit manager strategy how should they be treated with regards to including in composites?
If large legacy holding cannot be sold then assets should be what?
How should or model or hypothetical portfolios be treated?
Composites must be defined according to …what? and must be documented where?
What is the hierarchy of composite definition under GIPS?
What happens if composite is too narrow vs too broad?
Composites must included new portfolios on a …?
They should be included as of….?
What must be done if not enough time to implement strategy?
For deletions/exclusions terminated portfolios must be included in the composite through….?
Firms must have a written policy setting forward what (addition/removals)?
Portfolios can be switched to another composite if what (2 things)?
If there are significant cash flows a portfolio can be …?
For minimum asset levels portfolios below this would be considered what?
For minimum asset levels firms must have a policy stating what?
What are the two types of reports that firms might produce and how many years of returns must be included?
What are the required elements of a composite report?
Internal dispersion must be presented for …?
What are the two measures of internal dispersion?
For if Firm A acquires firm B, firm A can link past performance of firm B to its own if (4 things)?
- There must be no break in track record between A and B
Verification provides what for firms?
Verification provides assurance that what?
Verification comes in the form of what?
Which composite must verification be done on?
What are first 3 steps of verification?
What are last 3 steps of verification process?
