Standard I Professionalism PDF

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Summary

Topic 07 – ProfessionalismStandards Handbook – Structure I. Standard II. Guidance (= Requirements) III. Recommended Procedure for Compliance I. Firms II. Members, Candidates IV. Applications (= Cases)Standard I: Professionalism = KIMM A. Knowledge of the Law B. Independence and Objectivity C. Misrep...

Description

Topic 07 – Professionalism Standards Handbook – Structure I. Standard II. Guidance (= Requirements) III. Recommended Procedure for Compliance I. Firms II. Members, Candidates IV. Applications (= Cases) Standard I: Professionalism = KIMM A. Knowledge of the Law B. Independence and Objectivity C. Misrepresentation D. Misconduct

I (A) Knowledge of the Law Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations.

Guidance -

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More strict: Applicable law / Code & Standards Application – Exhibit 1 (pp. 16-18) Actions:  Notify supervisor or compliance department  May confront violator directly  Dissociate or separate if necessary (even resign) Inaction may be construed as participation / assistance No requirement to report violations to government or regulatory agencies (but may be appropriate in certain cases)

Recommended Procedures for Compliance Individuals - Stay informed:  Memos, continuing education program - Review procedures - Maintain current files  Statutes, rules and regulations up to date - When in doubt: seek compliance / legal action - Dissociation

Firm -

Develop/adopt code of ethics Distribute information internally on applicable laws, regulations Establish written procedures for reporting suspected violations

I (B) Independence and Objectivity Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. 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.

Guidance Focus on: - Buy-Side Clients - Fund Manager and Custodial Relationships - Investment Banking Relationships - Performance Measurement and Attribution - Public Companies

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Credit Rating Agency Opinions Influence during the Manager Selection/Procurement Process Issuer-Paid Research Travel Funding Avoid situations that could cause (or be perceived to cause) loss of independence or objectivity Modest gifts acceptable Distinguish between gifts from clients and gifts from entities trying to influence May accept gift from clients – disclose to employer Internal pressure to issue favourable reports Investment banking relationships – pressure to issue favorable research Performance measurement and attribution Manager selection process

Recommended Procedures for Compliance -

Protect integrity of opinions  Reports should reflect unbiased opinion Create a restricted list Restrict special cost arrangements  Accommodation, flights & other expenses Limit gifts Restrict investments  IPO share allocations Review procedures & establish formal written policy on independence & objectivity of research Independence policy Appointed officer

I (C) Misrepresentation Members and Candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.

Guidance Focus on: - Impact on Investment Practice - Performance Reporting - Social Media - Omissions - Plagiarism - Work Completed for Employer - Extends to all: oral, written, or electronic communications - Do not misrepresent:  Qualifications  Services of firm  Performance record  Characteristics of an investment - Do not guarantee a certain return

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No plagiarism – reports, data Performance reporting Social Media Omissions

Recommended Procedures for Compliance -

Factual Presentations Qualification Summary Verify Outside Information Maintain Webpages Plagiarism Policy  Maintain records of materials used to prepare research reports  Attribute quotes & summaries (except for recognised financial and statistical reporting services)

I (D) Misconduct Members and Candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence.

Guidance -

Addresses all conduct that reflects poorly on the professional integrity, good reputation, or competence of members and candidates Conduct that damages trustworthiness & competence Conduct may not be illegal, but could adversely affect a member’s ability to perform duties

Recommended Procedures for Compliance -

Adopt code of ethics Disseminate list of potential violations and associated disciplinary actions Conduct background checks on potential employees (good character and eligibility to work in investment industry)...