Standard 1: Professionalism

Question 1

What are the four ‘sub-standards’ for professionalism?

Answer 1

IA. Knowledge of the Law
IB. Independence and Objectivity
IC. Misrepresentation
ID. Misconduct

Question 2

What does Standard IA require?

Answer 2

Knowledge of the law

• Members must understand and comply with all applicable laws, rules and regulations
• In the event of conflict: candidate must comply with MORE STRICT law, rule or regulation
• Must not violate code or standard, even when it may be legal to do so

Question 3

What should an employee do when in violation of standard IA?

Answer 3

• Report internally to their employees

- Seek the advice of a legal counsel

Question 4

What kinds of violations are candidates responsible for?

Answer 4

• Violations they knowingly participate or assist in
• Candidates must also be aware of the evolving legal requirements applicable to them, and if they do not have knowledge, this will still constitute a violation

Question 5

What does standard IB require?

Answer 5

Independence and objectivity

• use reasonable care and judgement to achieve and maintain independence and objectivity
• must not offer, solicit or accept any gift, benefit, compensation or consideration: that could comprise their own or others independence and objectivity

Question 6

What kinds of activities violate standard IB?

Answer 6

• Allocation of oversubscribe IPOs
• Dishonest sell side research, or making research difficult to understand fully
• Not providing research in a factual manner
• Gifts or compensation in relation to hiring
• Mere appearance of lack of independence or objectivity

Question 7

When are gifts allowed?

Answer 7

• From a client: where the client has already entered into compensation agreement - however gift could be additional compensation

Question 8

What should employees do in relation to gifts?

Answer 8

• Disclose to employers: allows them to make an independent decision about threat to independence and objectivity

Question 9

What does standard I(C) require?

Answer 9

Misrepresentation
Members must not knowingly make any misrepresentation in relation to investment analysis, recommendations, actions or other professional activities

Question 10

What is a misrepresentation?

Answer 10

Untrue statement or omission of fact or any statement that is false and misleading

• Can be a direct misrepresentation or
• Omitting information that could modify the decision making process
• Guaranteeing clients any specific return on volatile investment
• Misrepresenting any aspects of practice (qualifications, services or experience)
• Misrepresentations in third party research also apply when it affects the professionals business practices

Question 11

What does standard I(d) require?

Answer 11

Related to misconduct
Members must not engage in any professional conduct involving dishonest, fraud, deceit or commitment to any act that reflects adversely on their professional reputation, integrity or competence

Question 12

What kinds of acts constitute misconduct?

Answer 12

Lying, cheating, stealing for example

Question 13

What is the key requirement for a misrepresentation being made under 1(C)?

Answer 13

KNOWINGLY