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T1

CFA Lvl 1 - Ethical and Professional Standards

QuestionAnswer
GIPS Global Investment Performance Standards
CFA Institute Board of Governors Maintains oversight and responsibility for the Professional Conduct Program (PCP).
Disciplinary Review Committee (DRC) Is responsible for enforcement of the Code and Standards.
What forms the basic structure for enforcing the Code and Standards The CFA Institute Bylaws and Rules of Procedure for Proceedings Related to Professional Conduct (Rules of Procedure).
The Rules of Procedure are based on two primary principals 1) Fair process to the member and candidate. 2) Confidentiality of proceedings
CFA Institute Standards of Practice Council (SPC) Volunteer group of CFA holders from many countries charged with maintaining and interpreting the Code and Standards and ensuring that they are effective.
The SPC ensures that the Code and Standards are 1) Representative of high standards of professional conduct 2) Relevant to the changing nature of the investment profession 3) Globally applicable 4) Sufficiently comprehensive, practical and specific 5) Enforceable 6) Testable for the CFA program
Why ethics matters? 1) Benefits all market participants 2) Increases investor confidence in global financial markets
CFA institute's goal on ethics To ensure that the organizations and its members develop, promote and follow the highest ethical standards in the investment industry.
Ethics and Market Sustainability Professionals should consider the long-term health of the market as a whole when making decisions.
Ethics and Regulation Apart from Regulations, strong ethical principles will limit abuses.
Ethics Education and Awareness CFA Institute provides the resources to extend and deepen the understanding of the principles' applications.
The code of ethics: 1) Act with integrity, competence, diligence, respect and in an ethical manner
The code of ethics: 2) Place the integrity of the investment profession and the interests of clients above their own personal interests.
The code of ethics: 3) Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions and engaging in other professional activities.
The code of ethics: 4) Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
The code of ethics: 5) Promote the integrity of and uphold the rules governing capital markets.
The code of ethics: 6) Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
The 7 Standards of Professional Conduct I. Professionalism II. Integrity of Capital Markets III. Duties to Clients IV. Duties to Employers V. Investment Analysis, Recommendations and Actions VI. Conflicts of Interest VII. Responsibilities as a CFA Inst. Mem. or CFA Cand.
I. Professionalism A. Knowledge of the Law B. Independence and Objectivity C. Misrepresentation D. Misconduct
Describe: A. Knowledge of the Law Must understand and comply with all applicable laws, rules and regulations.
Describe: B. Independence and Objectivity Must use reasonable care and judgment to achieve and maintain independence and objectivity.
Describe: C. Misrepresentation Must not knowingly make any misrepresentations.
Describe: D. Misconduct Must not engage in any professional conduct involving dishonesty, fraud or deceit.
II. Integrity of Capital Markets A. Material Nonpublic Information B. Market Manipulation
Describe: A. Material Nonpublic Information Should not user or distribute non public information (insider trading).
Describe: B. Market Manipulation Must not engage in practices that distort market prices.
III. Duties to Clients A. Loyalty, Prudence and Care B. Fair Dealing C. Suitability D. Performance Presentation E. Preservation of Confidentiality
Describe: A. Loyalty, Prudence and Care Should act for the benefit of the client. Should have duty of loyalty to the clients and act with reasonable care and exercise prudent judgment.
Describe: B. Fair Dealing Must deal fairly and objectively with all clients.
Describe: C. Suitability
Created by: vgjr on 2011-06-28



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