Ethics Flashcards
(72 cards)
What is one challenge to ethical behaviour?
Individuals tend to overrate the ethical quality of their behaviour and overemphasise the importance of their personal traits
What are 2 standard that some financial professionals are held to?
Suitability and fiduciary
What does suitability refer to?
The match between client return requirements and risk tolerances and the characteristics of the securities recommended
What is a fiduciary standard
Stronger than a suitability standard, it requires professionals to use their knowledge and expertise to act in the best interests of the client.
What is considered illegal in some places but may be ethical?
Whistleblowing
What is the framework for ethical decision making?
What can prompt a CFA inquiry?
- self disclosure by members or candidates on their annual professional conduct statements of involvement in civil litigation or a criminal investigation
- Written complaints about a member or candidates professional conduct
- evidence of misconduct that the CFA receives online or public source
- report by a CFA exam proctor of a possible violation during the exam
- analysis of exam scores and materials and monitoring of websites and social media by the CFA institute
What can the CFA do once an inquiry has begun?
What can the CFA board decide regarding an investigation?
What does the code of ethics state?
Act with integrity, competence, diligence, and respect and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
• Place the integrity of the investment profession and the interests of clients above their own personal interests.
• Use reasonable care and exercise independent, professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
• Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession
• Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
• Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
What is standard 1?
Professionalism - Know the law relevant to your position
What is standard 2
Integrity of capital markets - Do not act or cause others to act on material non public information
What is standard 3
Duties to clients - Act solely for the benefit of you client and know whom a fiduciary duty is owed with regard to trust accounts and retirement accounts
What is standard 4
Duties to employers - Act for the benefit of your employer
Standard 5
Investment analysis, recommendations and actions - Thoroughly analyse investments
Standard 6
Conflicts of interest - Avoid conflicts of interest where possible and disclose potential conflicts that cannot be avoided
Standard 7
Responsibilities as a CFA institute member - Do not cheat on any exams
What does GIPS stand for?
Global investment performance standards
Why was GIPS created
As a way to standardise the methodology for performance reporting, gives oversight bodies a clearer understanding of the returns achieved and the risks taken by the firms they supervise
Who does GIPS apply to?
Only to firms that actually manage assets
What are the 8 GIPS standards?
What is a composite?
Grouping of portfolios that a firm manages using a similar investment strategy, objective or mandate
To comply with GIPS what must a composite do?
The firm must assign each portfolio to its composite before the portfolios performance is known. This prevents firms from choosing portfolios selectively.
To be GIPS compliant what must the firm be defined as?
The corporation, subsidiary or division that is held out to clients as a business entity.
