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Professionalism - I(B) Independence and Objectivity


a. demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations of issues involving issues of personal integrity

Flash cards

What are external sources likely trying to do by offering perks? They are trying to influence the investment process because they know that excessive gifts or lavish functions could prejudice a members opinions.

As an investment manager, are modest gifts acceptable? Yes, modest gifts and entertainment is acceptable. Anything under $100 may be accepted, as well as entertainment.

What is the difference between gifts from clients vs gifts from other parties seeking to influence a member to the detriment of clients? Gifts from clients are seen as less likely to impair a members independence than gifts from other parties seeking to influence the members outlook.

b. distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards

Flash cards

What are the two components of SoPC, Standard I(B)? 1. Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. 2. Members and Candidates must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity.

If, as an investment manager, you are offered shares of an oversubscribed IPO for your personal account, what is likely happening? What should you do? Somebody is attempting to influence your opinion on the IPO. You should decline the offer because you need to avoid situations that cause or could be perceived to cause a loss of independence or objectivity.

If you are an analyst for a company, and they invite you on a trip to see operations and pay for food and lodging. Is this a violation of the Standard? It is permissible if the trip is strictly for business and the accommodations are not lavish.

If you are a portfolio manager and a company you direct a large amount of the commission business into a London brokerage house, who gives you superbowl tickets. If you don’t disclose this to your supervisor, are you violating the Standard? Yes, if you don’t disclose this activity you are in violation because the tickets are worth more than $100 and could be perceived to have influenced your independence and objectivity.

c. recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct

Flash cards

If you receive a gift from a client, what should you do right away? Disclose the gift to your employer.

What are the five procedures for compliance to avoid violations of Standard I(B) Independence and Objectivity? 1. Protect the integrity of your opinions through policy and compensation structures 2. Create a restricted list of companies who can’t have negative opinions published 3. Restrict special cost arrangements by not allowing members to pay, use client’s private transportation (unless it would be inconvenient otherwise), and don’t have all meetings at client sites. 4. Limit gifts that aren’t ordinary or customary 5. Implement and review procedures relating to personal investment activities