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CFA LEVEL 1 > ETHICS > Flashcards

ETHICS Flashcards

(56 cards)

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1
Q

What does Standard I(A) cover?

A

Knowledge of the Law – Understand and comply with laws, rules, and regulations always follow the most strict rule applicable.

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2
Q

What does Standard I(B) prohibit?

A

Misrepresentation – No false statements, no omitting material facts, and no plagiarism.

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3
Q

What is required by Standard I(C)?

A

Misconduct – Do not engage in fraud, dishonesty, or any conduct that reflects poorly on professional reputation or integrity.

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4
Q

What is Standard I(D) about?

A

Independence and Objectivity – Use reasonable care and avoid bias, including rejecting gifts or compensation that could compromise objectivity.

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5
Q

What does Standard II(A) prohibit?

A

Material Nonpublic Information – Do not act or cause others to act on insider information.

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6
Q

What does Standard II(B) cover?

A

Market Manipulation – No practices that distort prices or mislead market participants (e.g., spreading rumors, pump-and-dump).

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7
Q

What does Standard III(A) require?

A

Loyalty, Prudence, and Care – Act in the best interest of clients, use prudent judgment, and act with care.

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8
Q

What is Standard III(B) about?

A

Fair Dealing – Treat all clients fairly and equally when disseminating recommendations or executing trades.

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9
Q

What does Standard III(C) refer to?

A

Suitability – Make suitable recommendations based on client needs, objectives, and constraints.

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10
Q

What does Standard III(D) require?

A

Performance Presentation – Present performance fairly, accurately, and completely (avoid cherry-picking).

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11
Q

What is Standard III(E)?

A

Preservation of Confidentiality – Keep client info confidential unless: (1) illegal activities, (2) client consents, or (3) required by law.

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12
Q

What does Standard IV(A) require?

A

Loyalty – Act in employer’s best interest, avoid conflicts, and do not misuse employer resources.

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13
Q

What is Standard IV(B)?

A

Additional Compensation Arrangements – Disclose and get written consent before accepting any compensation from non-employer sources.

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14
Q

What does Standard IV(C) focus on?

A

Responsibilities of Supervisors – Ensure reasonable supervision of those under your authority to prevent violations.

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15
Q

What does Standard V(A) require?-

A

Diligence and Reasonable Basis – Perform thorough research and have a reasonable basis for all recommendations.

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16
Q

What is Standard V(B)?

A

Communication with Clients and Prospective Clients – Disclose risks, limitations, and investment processes clearly.

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17
Q

What does Standard V(C) refer to?

A

Record Retention – Keep records that support research and investment decisions.

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18
Q

What does Standard VI(A) require?

A

Disclosure of Conflicts – Fully disclose potential or actual conflicts in plain language.

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19
Q

What is Standard VI(B)?

A

Priority of Transactions – Client transactions must come before personal or firm trades.

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20
Q

What does Standard VI(C) cover?

A

Referral Fees – Disclose any referral compensation arrangements to clients and employers.

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21
Q

What is Standard VII(A)?

A

Conduct as Members and Candidates – Do not engage in any conduct that compromises CFA reputation or integrity.

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22
Q

What does Standard VII(B) prohibit?

A

Reference to CFA Institute, Designation, or Program – Don’t misrepresent your CFA status or claim partial designation (e.g., “CFA Level 2”).

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23
Q

What does GIPS stand for?

Study These Flashcards
A

Global Investment Performance Standards

24
Q

What is the purpose of GIPS?

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A

To provide a standardized, ethical framework for investment performance reporting to ensure fair representation and full disclosure.

25
Are GIPS compliance mandatory?
No, GIPS compliance is voluntary but strongly encouraged for firms managing assets.
26
What are the key principles of GIPS?
Fair representation, full disclosure, consistency, comparability, and global acceptance.
27
What must a firm include when claiming GIPS compliance?
A statement that the firm has complied with GIPS, and a list of compliant composite presentations.
28
What is a composite in GIPS?
A group of discretionary portfolios managed according to a similar investment mandate, objective, or strategy.
29
What is the minimum history requirement for GIPS compliance?
5 years of compliant performance (or since inception if less than 5 years), building up to 10 years.
30
Can firms link non-GIPS compliant performance to GIPS-compliant performance?
Yes, but only if the non-compliant periods are clearly disclosed and meet certain requirements.
31
What are the main sections of GIPS standards?
Fundamentals of Compliance, Input Data, Calculation Methodology, Composite Construction, Disclosures, Presentation and Reporting, Real Estate, Private Equity, Wrap/SMA Portfolios, Verification.
32
What is verification in GIPS?
An independent review of a firm's compliance with GIPS standards (not required but recommended).
33
What are the 6 components of the CFA Code of Ethics?
1. Act with integrity, competence, diligence, respect; 2. Place client interests first; 3. Use reasonable care; 4. Practice and encourage others to act professionally and ethically; 5. Promote market integrity; 6. Maintain and improve professional competence;
34
What is the purpose of the CFA Standards of Professional Conduct?
To provide guidance on ethical behavior and best practices for investment professionals.
35
What is Standard I(A)?
Knowledge of the Law – Members must understand and comply with all applicable laws, rules, and regulations.
36
What is Standard I(B)?
Independence and Objectivity – Avoid conflicts of interest and do not offer or accept gifts that compromise independence.
37
What is Standard I(C)?
Misrepresentation – Do not misrepresent qualifications, services, or investment performance.
38
What is Standard I(D)?
Misconduct – Do not engage in any professional conduct involving dishonesty or fraud.
39
What is Standard II(A)?
Material Nonpublic Information – Do not act or cause others to act on material nonpublic information.
40
What is Standard II(B)?
Market Manipulation – Do not engage in practices that distort prices or artificially inflate trading volume.
41
What is Standard III(A)?
Loyalty, Prudence, and Care – Place client interests above your own.
42
What is Standard III(B)?
Fair Dealing – Deal fairly with all clients when providing investment analysis or recommendations.
43
What is Standard III(C)?
Suitability – Make investment recommendations suitable to client situation.
44
What is Standard III(D)?
Performance Presentation – Present performance information fairly and accurately.
45
What is Standard III(E)?
Preservation of Confidentiality – Keep client information confidential unless required by law.
46
What is Standard IV(A)?
Loyalty – Act for the benefit of your employer and do not harm them.
47
What is Standard IV(B)?
Additional Compensation Arrangements – Disclose all compensation arrangements that could cause a conflict of interest.
48
What is Standard IV(C)?
Responsibilities of Supervisors – Ensure subordinates comply with laws and standards.
49
What is Standard V(A)?
Diligence and Reasonable Basis – Have a reasonable and adequate basis for recommendations and actions.
50
What is Standard V(B)?
Communication with Clients and Prospects – Disclose basic format and limitations of the investment process.
51
What is Standard V(C)?
Record Retention – Maintain appropriate records to support analysis and actions.
52
What is Standard VI(A)?
Disclosure of Conflicts – Fully disclose all matters that could impair objectivity.
53
What is Standard VI(B)?
Priority of Transactions – Client transactions take precedence over personal ones.
54
What is Standard VI(C)?
Referral Fees – Disclose any compensation received for client referrals.
55
What is Standard VII(A)?
Conduct as Members and Candidates – Do not engage in conduct that compromises the CFA designation.
56
What is Standard VII(B)?
Reference to CFA Institute, Designation, and Program – Do not misrepresent or exaggerate your CFA status.

CFA LEVEL 1 (8 decks)

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