Volume II behavioral finance, individual investors, and institutional InvestorsCFA level 3finquiz smart summary, study session 1, reading 1
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2018 Study Session # 1, Reading # 1
“CODE OF ETHICS AND STANDARDS
OF PROFESSIONAL CONDUCT”
M&C = Members & Candidates
COE = Code of Ethics
SOPC = Standards of
Professional conduct
BOG=Board of Governors
PDP=Professional Development
Program
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CFAI PCP ⇒ covered by CFAI Bylaws & Rules for Procedures Related to
Professional Conduct.
PCP is based on principles of fairness to M&C& confidentiality of
proceedings.
DRC of CFAI BOG ⇒ responsible for PCP & enforcement of code & standards.
CFAI = CFA Institute
PCP = Professional Conduct
Program
DRC = Disciplinary Review
Committee
PCS = Professional Conduct
Statement
Circumstances Which Can Prompt Inquiry
Self disclosure by member/candidate on PCS which
comprehensively questions professional conduct such as
involvement in civil litigation, criminal investigation or any complaint
(written) against the member/candidate etc.
Written complaints about member/candidate received by professional
conduct staff.
Evidence of misconduct by member/candidate received by professional
conduct staff through public source.
A report by CFA proctor of a possible violation during examinations.
CFAI designated officer conducts inquiries.
Professional conduct staff (in writing) may request explanation from subject
member/candidate & may:
Interview the subject member/candidate.
Interview the complainant / third party.
Collect relevant documents& records.
Designated officer may decide:
That disciplinary sanctions are not required.
To issue a cautionary letter.
To discipline the member/candidate.
If disciplinary sanction is proposed, the subject member/candidate may
accept the sanction.
If sanction is rejected ⇒ matter may be referred to CFAI panel for hearing.
Sanctions may include.
Condemnation by member’s peers.
Suspension of candidate’s continued participation in CFAI program.
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Act with integrity, competence, diligence, 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 of and uphold the rules governing capital markets.
Maintain and improve their professional competence and strive to maintain and improve the competence of other investment
professionals.
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2018 Study Session # 1, Reading # 1
Standards of Professional Conduct
1. Professionalism
2. Integrity of Capital Markets
3. Duties to Clients
6. Conflicts of Interest
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4. Duties to Employers
5. Investment Analysis,
Recommendations& Actions
7. Responsibilities as a CFAI Member or CFAI Candidate
1. Professionalism
A. Knowledge of Law
B. Independence & Objectivity
C. Misrepresentation
D. Misconduct
2. Integrity of Capital Markets
A. Material Non-Public Information
B. Market Manipulation
3. Duties to Clients
A. Loyalty,
Prudence, and Care
B. Fair Dealing
C. Suitability
D. Performance
Presentation
E. Preservation of
Confidentiality
4. Duties to Employers
B. Additional Compensation
Arrangements
A. Loyalty
C. Responsibility of
Supervisors
5. Investment Analysis, Recommendations& Actions
A. Diligence & Reasonable
Basis
B. Communication with
Clients & prospective
Clients
C. Record Retention
6. Conflicts of Interest
A. Disclosure of conflicts
B. Priority of Transactions
C. Referral Fees
7. Responsibilities as a CFAI Member or CFAI Candidate
A. Conduct as Members and Candidates in
the CFA Program
B. Reference to CFA Institute, the CFA
Designation, and the CFA Program
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