Ethical and Professional Standards

Ethical and Professional Standards
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Members should disclose all matters that reasonably could be expected to impair the member's objectivity as outlined in Standard I(B), and Standard VI(A).
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(B), Standard VI(A)
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Standard II(A) prohibits members or candidates from acting on material non-public information even if local laws or compliance departments allow it. In the event of conflict between the Code and Standards and local laws, Standard I(A) requires members or candidates to comply with the stricter law, rule, or regulation.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(A), Standard II(A)
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Standard IV(C)–Responsibilities of Supervisors states that members and candidates must make reasonable efforts to prevent violation of applicable laws, rules, regulations, and the Code and Standards by anyone subject to their supervision or authority. Interviewing with a competitor during lunch or taking clients out to lunch do not necessarily violate any standard unless specifically prohibited in company policies.
2014 CFA Level I
"Ethics and Professional Standards," CFA Institute
Standard IV(C)– Responsibilities of Supervisors, Standard III(E)–Preservation of Confidentiality
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Prior-clearance processes guard against potential and actual conflicts of interest; members are required to abide by their employer's compliance procedures (Standard VI (B)).
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard V(A), Standard VI(B)
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Under Standard 1(A) in situations where a member or candidate is aware of employer engagement in unethical or illegal activity, it is recommended that they attempt to stop the behavior by bringing it to the attention of a supervisor or the firm's compliance department.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(A)
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According to guidance for Standard (IV(C), if a member cannot fulfill supervisory responsibilities because of the absence of a compliance system or because of an inadequate compliance system, the member should decline in writing to accept supervisory responsibility until the firm adopts reasonable procedures to allow the member to adequately exercise such responsibility.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard IV(C)
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Lan's actions do not violate Standard IV (A) – Duties to Employers. Lan does not use company time to make arrangements for his new venture, nor does he misappropriate any information (financial models or client contacts) from his former employer. All of Lan's actions are permissible under Standard IV (A).
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard IV(A)
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It is a recommendation but not a requirement that firms obtain independent third-party verification to claim GIPS compliance. Firms are required to include all discretionary,
fee-paying portfolios in at least one composite. They must also present a minimum of five years of annual investment performance compliant with the GIPS standards.
2014 CFA Level I
"Global Investment Performance Standards (GIPS)," CFA Institute
GIPS Standards
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The CFA Institute Code of Ethics requires members to act with integrity, competence, diligence, respect, and in an ethical and professional manner. The Standards of Professional Conduct relating to professional misconduct state members and candidates must not commit any act reflecting adversely on their professional reputation, integrity, or competence. Bennett's actions violated the Code of Ethics and StandardI(D)–Professionalism, but not Standard II–Integrity of Capital Markets.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(D), Standard II
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Verification tests (Standard V) whether the investment firm has complied with all the composite construction requirements of GIPS on a firm-wide basis, and whether the firm's processes and procedures are designed to calculate and present performance results in compliance with the
GIPS standards. Verification must be performed by an independent third party. A firm cannot perform its own verification.
2014 CFA Level I
"Introduction to the Global Investment Performance Standards (GIPS)," CFA Institute, 2011
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His resume should read CFA, 2013, CFA Institute. The resume is incorrect because it lists the CFA Society of Pittsburgh instead of CFA Institute as the organization associated with the CFA designation.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard VII(B)
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Standard III (D)-Performance Presentation pertains to investment performance information and there is no indication any violation has occurred.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(C)
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O'Keefe can delegate a due diligence exercise to a third party but must ensure the person or company hired to do so is competent and has the skills necessary to undertake a thorough and appropriate analysis. Although Carlson may be qualified to undertake this assignment,
O'Keefe needs to take the necessary steps to ensure that he is indeed qualified. Just because a person is a CFA charterholder does not necessarily mean he or she is appropriate for the assignment.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard V(A)
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Jones has used the mosaic theory to combine nonmaterial, nonpublic information with material public information.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard II(A) Material Nonpublic Information
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There is nothing to suggest that Wong does not have a reasonable basis for his conclusion related to Nolvec, as required by Standard V(A).
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard III(A), Standard VI(B), Standard V(A)
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Under Standard III (B), if an investment professional's family- member accounts are being managed similarly to those of other clients of the firm, family members should not be excluded from buying such shares because they are considered clients despite their familial relationships.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard III(B)
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Selective disclosure occurs when companies discriminate in making material nonpublic information public. Corporations that disclose information on a limited basis create the potential for insider-trading violations. See Standard II(A).
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard II(A)
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A supervisor's responsibilities relate to detecting and preventing violations by anyone subject to their supervision or authority regarding activities they supervise. Ndenda had no way of detecting and/or preventing Rutabingwa from cheating during the CFA exam, if in fact that is what she did, because it was an event she did not attend.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard IV(C)
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In cases where applicable local laws governing calculation and presentation of investment performance conflict with the GIPS standards, firms must comply with local regulations and fully disclose the conflict in the compliant presentation.
2014 CFA Level I
"Global Investment Performance Standards (GIPS)," CFA Institute
Section 4.A.22
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The Standards require members to make reasonable efforts to make sure performance information is fair, accurate, and complete. The Standards do not require compliance with the (GIPS) standards, auditing, or verification requirements. See Standard III(D).
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
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Photocopying copyrighted material, regardless of the year of publication, is a violation of Standard I(A) because copyrighted materials are protected by law. Candidates and members
must comply with all applicable laws, rules, and regulations and must not knowingly participate or assist in a violation of laws.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(A)
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Prior to undertaking analysis with regard to expected returns, an adviser must determine the suitability of an investment class, including whether it fits within the client's risk tolerance and whether it is an allowable asset class as per the client's investment policy statement.
Only after these factors have been determined should she proceed, if appropriate, to analyze expected returns to determine a particular investment recommendation.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard III(C)
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Because he registered to take the exam in the next year, Donnigan still qualifies to state he is a candidate in the CFA Program. He would not, however, be authorized to reference that he is a Level III candidate and, if asked, would need to specifiy that he is a Level II candidate.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(D), Standard IV(A)
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There is no indication that the investment club is trading ahead of clients. See Standard VI(B).
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(C), Standard VI(A), Standard VI(B)
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Buffet sat on the audit committee that determined the bank's provisioning policies that were contrary to the statutory regulations of the central bank. As a result, he most likely violated Standard I–Professionalism by not abiding by regulations of a regulatory body. Gatabaki did not violate Standard I - Professionalism because it is not apparent she knowingly facilitated the incorrect provisioning policy.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard I(A)
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The process by which financial analysts combine material public information and nonmaterial nonpublic information as a basis for investment recommendations, even if those conclusions would have been material inside information had the company communicated them directly to the analyst, is known as mosaic theory.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard II(A)
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To comply with the Code and Standards, a member or candidate cannot use material nonpublic information when making investment recommendations. The information overheard would not be considered material only if any public announcement of the staff removal would be unlikely to move the share price of the bank, nor would the regional expansion substantially impact the value of the bank.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard II(A)
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No designation exists for someone who has passed Level I, Level II, or Level III of the CFA exam, see Standard VII(B). Persons who have passed a certain level of the exam may state that they have completed that level. A person can state he is a candidate only if he is currently enrolled in the CFA Program. It is also an improper reference to use "expected" a part of the designation.
2014 CFA Level I
"Guidance for Standards I-VII", CFA Institute
Standard VII(B)
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According to Standard III (B) best practices include allocating pro rata on the basis of order size, not account size. All clients participating in the block trade should receive the same execution price and be charged the same commission.
2014 CFA Level I
"Guidance for Standards I-VII," CFA Institute
Standard III(B)
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Composites (Standard IV – Composites) must be defined according to similar investment objectives and/or strategies. Terminated portfolios must be included in the historical returns of appropriate composites, and only fee-paying portfolios are to be included in composites.
Non-discrectionary portfolios must not be included in a firm's composites.
2014 CFA Level I
"Introduction to the Global Investment Performance Standards (GIPS)," CFA Institute。