Folder:
115 CFA
File:
115.010.20.30 Reading 2 - Code of Ethics - LOS c. ethical responsibilities

c. explain the ethical responsibilities required by the Code and Standards; including the sub-sections of each Standard

Command word

  • Explain: To make clear the meaning of "Explain interest rate parity"

Flash cards

What are the Seven 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 or CFA Candidate

What is Section 1, and the associated Sub-sections of the Standards of Professional Conduct?
Section I is Professionalism. Sub-sections are:
A. Knowledge of the Law
B. Independence and Objectivity
C. Don't knowingly Misrepresent
D. Don't engage in Misconduct

Explain Section 1, Sub-section A of the Standards of Professional Conduct
Section 1 is Professionalism. Sub-section A is Knowledge of the Law. You must understand and comply with the law, in the case of conflict follow the more strict law, do not knowingly participate in breaking the law.

Explain Section 1, Sub-section B of the Standars of Professional Conduct
Section 1 is Professionalism, Sub-section B is Independence and Objectivity. You must maintain independence and objectivity, don't accept gifts, benefits, or compensation, which might jeopardize independence and objectivity.

What is Section 2, and the associated Sub-sections, of the Standards of Professional Conduct?
Section 2 is Integrity of Capital Markets. The Sub-sections are:
A. Material nonpublic information. If you have it, don't act on it or allow others to act on it.
B. Market manipulation. Don't distort prices or inflate trading volume.

What is Section 3, and the associated Sub-sections, of the Standards of Professional Conduct?
Section 3 is Duties to Clients. The Sub-sections are:
A. Loyalty, prudence, and care
B. Fair dealing
C. Suitability
D. Performance presentation
E. Preservation of confidentiality

Explain Section 3, Sub-section A, of the Standards of Professional Conduct
Section 3 is Duties to Clients, and Sub-section A is Loyalty, Prudence, Care. You must act in the benefit of clients' interests before employers or yourself.

What section, and sub-section of the Standards of Professional Conduct cover the advisory relationship with a client? What does it say?
Section 3 is Duties to Clients, Sub-section C is Suitability. It says that when you're in an advisory relationship with a client you should
a. assess their investment experience, what their goals are,
b. ensure investments are suitable for their goals and situation and fit in their portfolio

According to the Standards of Professional Conduct, Section 3, Sub-section C, how should a portfolio with a specific investment mandate be managed?
Section 3 is Duties to Clients, and Sub-section C is Suitability. If you're managing an investment portfolio with a specific investment mandate, you should only take investment actions that are consistent with the stated objectives and constraints of that portfolio.

What does the Standards of Professional Conduct, Section 3, Sub-section D say?
Section 3 is Duties to Clients. Sub-section D is Performance Presentation. The section says that make an effort to ensure your communication is fair, accurate, and complete.

Under what circumstances is it OK to not keep client information confidential according to which Section and Sub-section of the Standards of Professional Conduct?
Under SoPC Section 3, Duties to Clients, Sub-section E, Preservation of Confidentiality, you should always keep client information confidential unless
a. The information concerns illegal activities
b. Disclosure is required by law
c. The client permits disclosure

What is SoPC Section 4, and what it's Sub-sections?
SoPC Section 4 is Duties to Employers. The Sub-sections are:
A. Loyalty
B. Additional Compensation Arrangements
C. Responsibilities of Supervisors

What is SoPC Section 4, Sub-section A, and what does it say?
SoPC Section 4 is Duties to Employers. Sub-section A is Loyalty. It says you should act in the benefit of your employer and not cause harm to your employer.

What is SoPC Section4, Sub-section B, and what does it say?
SoPC Section 4 is Duties to Employers. Sub-section B is Additional Compensation Arrangements. It says you should not accept gifts, benefits, or compensation that could create a conflict with your employer unless all parties agree it's OK.

What is SoPC Section 5, and what are it's Sub-sections?
SoPC Section 5 is Investment Analysis, Recommendations, and Actions. It's Sub-sections are:
A. Diligence and Reasonable Basis
B. Communication with Clients and Prospective Clients
C. Record Retention

What are the basic precepts of SoPC Section 5, Sub-Section A?
SoPC Section 5 is Investment Analysis, Recommendations, and Actions. Sub-section A is Diligence and Reasonable Basis, which says that you should put some work into your recommendations, and do the appropriate research.

What are the 3 points of SoPC Section 5, Sub-section B?
SoPC Section 5 is Investment Analysis, Recommendations, and Actions. Sub-section B is Communication with Clients and Prospective Clients. The 3 points are:
1. Dislcose your investment principles and processes, and notify of changes to that materially affect them.
2. Use your judgement to identify the important investment factors and include those factors in communication with the client
3. Distinguish between fact and opinion

What SoPC Section and Sub-section talks about Record Retention? What does it say?
SoPC Section 5 (Investment Analysis, Recommendations, and Actions), Sub-section C (Record Retention). It says you must create and maintain appropriate records for investments and keep them for 7 years.

What is SoPC Section 6, and what are it's Sub-sections?
SoPC Section 6 is Conflicts of Interest. The Sub-sections are:
A. Disclosure of Conflicts
B. Priority of Transactions
C. Referral Fees

Which SoPC covers Disclosure of Conflicts? What does it state?
SoPC Section 6, Sub-section A says that you should disclose anything which could impair objectivity or independence, and that you need to do it promptly in clear language.

What is SoPC Section 6, Sub-section B and what does it say?
SoPC Section 6 is Conflicts of Interest. Sub-section B is Priority of Transactions. It says that client and employer transactions have priority over your own.

What does SoPC Section 6 say about referral fees?
Section 6 is Conflicts of Interest. Sub-section C says that you must dislcose any compensation, benefits, or consideration received from or paid to others for recommendations.

What is SoPC Section 7, and what are it's Sub-sections?
SoPC Section 7 is Responsibilities as a CFA member or CFA candidate. The Sub-sections are:
A. Conduct as Members and Candidates in the CFA Program
B. Reference to CFA Institute, the CFA Designation, and the CFA Program

What is SoPC Section 7, Sub-sections A and B?
Section 7 is Responsibilities as a CFA.
- Sub-section A is Conduct as Members and Candidates in the CFA Program. It says that you must not engage in conduct that compromises the integrity or reputation of the CFA program.
- Sub-section B is Reference to the CFA Institute, program, and designation. It says you can't misrepresent the CFA program.


Source:
  • CFA