Ethics #2 - Guidance of Standards I-VII Flashcards
STANDARD I: PROFESSIONALISM
Standard I(A) Knowledge of the Law
LOS 2.a
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. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations.
STANDARD I: PROFESSIONALISM
Standard I(B) Independence and Objectivity
LOS 2.a
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.
STANDARD I: PROFESSIONALISM
Standard I(C) Misrepresentation
LOS 2.a
Members and Candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.
STANDARD II: INTEGRITY OF CAPITAL MARKETS
Standard II(A) Material Nonpublic Information
LOS 2.a
Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.
STANDARD II: INTEGRITY OF CAPITAL MARKETS
Standard II(B) Market Manipulation
LOS 2.a
Members and Candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.
STANDARD III: DUTIES TO CLIENTS
Standard III(A) Loyalty, Prudence, and Care
LOS 2.a
Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. Members and Candidates must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests.
STANDARD III: DUTIES TO CLIENTS
Standard III(B) Fair Dealing
LOS 2.a
Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities.
STANDARD III: DUTIES TO CLIENTS
Standard III(C) Suitability
LOS 2.a
- When Members and Candidates are in an advisory relationship with a client, they must:
- 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 or taking investment action and must reassess and update this information regularly.
- Determine that an investment is suitable to the client’s financial situation and consistent with the client’s written objectives, mandates, and constraints before making an investment recommendation or taking investment action.
- Judge the suitability of investments in the context of the client’s total portfolio.
- When Members and Candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must make only investment recommendations or take only investment actions that are consistent with the stated objectives and constraints of the portfolio.
STANDARD III: DUTIES TO CLIENTS
Standard III(D) Performance Presentation
LOS 2.a
When communicating investment performance information, Members and Candidates must make reasonable efforts to ensure that it is fair, accurate, and complete.
STANDARD III: DUTIES TO CLIENTS
Standard III(E) Preservation of Confidentiality
LOS 2.a
Members and Candidates must keep information about current, former, and prospective clients confidential unless:
- The information concerns illegal activities on the part of the client;
- Disclosure is required by law; or
- The client or prospective client permits disclosure of the information.
STANDARD IV: DUTIES TO EMPLOYERS
Standard IV(A) Loyalty
LOS 2.a
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 information, or otherwise cause harm to their employer.
STANDARD IV: DUTIES TO EMPLOYERS
Standard IV(B) Additional Compensation Arrangements
LOS 2.a
Standard IV(B) Additional Compensation Arrangements
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.
STANDARD IV: DUTIES TO EMPLOYERS
Standard IV(C) Responsibilities of Supervisors
LOS 2.a
Standard IV(C) Responsibilities of Supervisors
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.
STANDARD V: INVESTMENT ANALYSIS, RECOMMENDATIONS, AND ACTIONS
Standard V(A) Diligence and Reasonable Basis
LOS 2.a
Standard V(A) Diligence and Reasonable Basis
Members and Candidates must:
- Exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions.
- Have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action.
STANDARD V: INVESTMENT ANALYSIS, RECOMMENDATIONS, AND ACTIONS
Standard V(C) Record Retention
LOS 2.a
Standard V(C) Record Retention
Members and Candidates must develop and maintain appropriate records to support their investment analyses, recommendations, actions, and other investment-related communications with clients and prospective clients.
