LOS1.a: Describe the structure of the CFA Institute Professional Conduct Program and the process of the enforcement of the Code and Standards.
Several circumstances prompt an inquiry:
1) lf-disclosure by members or candidates on annual Professional Conduct Statement of involvement in civil litigation or a criminal investigation, or that the member or candidate is the subject of a written complaint.
2) written complaints about a member or candidate's professional conduct that are received by the Professional Conduct Staff.
3) Evidence of misconduct by a member or candidate that the Professional Conduct staff received through public sources
4) A report by a CFA exam proctor of a possible violation during the examination
Once an inquiry begins, may 1) request (in writing) an explanation from the subject memb
er or candidate, & may:2) interview the subject member or candidate; 3) interview the complainant or other third parties; 4) collect documents and records relevant to the investigation.
Possible decision of Designated Officer: 1) no disciplinary sanctions are appropriate, 2) to issue a cautionary letter 3) to discipline the member or candidate
=> subject member or candidate can accept or reject the sanction, if reject, the matter will be referred to a panel of CFA institute members for a hearing. Sanctions impod may include condemnation by the members' peers or suspension of candidates' continued participation in the CFA Program.
LOS1.b: State the six components of the Code of Ethics and the ven standards of Professional Conduct.
Code of Ethics
1) Act with integrity, competence, diligence, respect, and in an ethical manner with the pu
blic, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
2) Place the integrity of the investment profession and the interests of clients above their own interests.
3) U reasonable care and exerci independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities
4) Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themlves and the profession.
5) Promote the integrity of, and uphold the rules governing capital markets
6) Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
The Standards of Professional Conduct
1) Professionalism
2) Integrity of Capital Markets
3) Duties to Clients
4) Duties to Employers
5) Investment Analysis, Recommendations, and Actions
6) Conflicts of Interest
7) Responsibilities as a CFA Institute Member of CFA candidate
LOS1. c: Explain the ethical responsibilities required by the Code and Standards, including the sub-ctions of each Standard.
Professionalism:
1) knowledge of the Law: Conflict? => comply with the more strict law
2) independence and objectivity: u reasonable care and exerci independent professional judgment, no offer, solicit, accept any gift, benefit, compensation or consideration
3) misreprentation
4) misconduct (dishonesty, fraud, deceit, commit )
Integrity of capital markets
1) Material Nonpublic Information
2) Market Manipulation: distort prices or artificially inflate trading volume with the intent to mislead market participants.
Duties to clients
1) Loyalty, prudence, and care.
2) Fair dealing
3) Suitability: i) advisory: [1]inquiry into clients' investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation or taking investment action and must reasss and update this info regularly. [2] determine the suitability of investment to clients' financial situation and consistent with written objectives, mandates, and constraints [3] judge the suitability of investment in the context of clients' total portfolio. ii) managing portfolio to a specific mandate, strategy, or style
4) Performance prentation: investment performance info must be fair, accurate and complete
5) Prervation of Confidentiality unless: illegal activities on the part of client; disclosure is required by law; or client permits disclosure.
