Someone recently bought our

students are currently browsing our notes.

X

Cfa1 1 Ethical And Professional Standards Notes

Finance Notes > CFA Level 1 Notes

This is an extract of our Cfa1 1 Ethical And Professional Standards document, which we sell as part of our CFA Level 1 Notes collection written by the top tier of University Of London (examined By LSE) students.

The following is a more accessble plain text extract of the PDF sample above, taken from our CFA Level 1 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

CFA Level 1

Unit 1: Ethical and Professional Standards

UOLLB CFA Top Notes
Level 1 Exam

Unit 1: Ethical & Professional
Standards
Table of Contents
Professionalism..................................................1
Integrity.............................................................2
Duties to Clients................................................3
Duties to Employers..........................................4
Investment Analysis...........................................5
Conflicts of Interest...........................................6
Global Investment Performance Standards.......6
Professionalism
Knowledge of the Law
 Comply with all applicable laws, rules, and regulations, codes and standards
 Comply with the stricter ones in case of conflict
 Not participate in any violation
 Dissociate from any violation
 Presumed to have knowledge of all applicable laws
Duties of Analysts
 Stay Informed of changes in applicable laws
 Review compliance procedures regularly
 Maintain up-to-date reference copies of applicable laws and cases
 Seek further legal advice when in doubt
 Report violations to appropriate organization(s) or CFA Institute
Duties of Firms
 Develop / adopt / adhere to a code of ethics
 Keep staff informed of relevant laws
 Establish written protocols for reporting suspected violations
Independence and Objectivity (IO)
 Use reasonable care and judgment to achieve and maintain IO
 Not offer, solicit or accept any benefit at the expense of IO
 Avoid potential conflict of interest
 Can accept modest gifts and entertainment
 Disclose any benefits received and potential

conflicts of interest
 Give investment opinions free of bias
 Use clear and unambiguous language to give investment opinions
 Anticipate / Interpret / Assess a company in a factual manner
Duties of Firms
 Maintain a culture supporting IO
 Separate clearly authority and responsibility
Due Diligence
 Gather info from a wide variety of sources
 Disclose necessary info
Sources of Pressure threatening IO
 Investment Banking Clients
 Public Companies
 Buy-side Clients (e.g. Portfolio managers)
 Issuer-Paid Research
Buy-side Analysts
 Hired by an entity, such as a mutual fund,
that invests on firm capital
 Identify investment opportunities for their firm
 Research usually unavailable to external parties
Sell-side Analyst
 Hired by an entity, such as a brokerage firm,
that manages clients' money
 Identify investment opportunities for their clients
 Research usually available to external parties

1 CFA Level 1

Unit 1: Ethical and Professional Standards

Underwriter
 An intermediary between an issuer of a security and the investor
Duties of Analysts
 Adhere to strict standards of conduct
 Engage in thorough, independent and unbiased analysis
 Disclose potential conflicts
 Analyse audited financial statements thoroughly
 Provide thorough benchmarking and industry analysis
 Conduct research in an objective manner
 Distinguish facts and opinions in reports
 Give reasonable conclusions supported by appropriate research
 Accept only a flat fee prior to writing a report

 Disclose any outsourced research
 Not commit plagiarism in oral communications
 Not use undocumented info
 Reveal sources to bring responsibility back to the author
Duties of Firms
 Limit capabilities of individual staff
 Provide guidance for employees who make presentations to (potential) clients
 Designate which employees can speak on behalf of the firm
 Require staff to prepare a summary of their qualifications / experience
 Monitor materials published on the web pages regularly
 Maintain copies of all research reports /
articles

Duties of Firms
 Establish policies to protect integrity of opinions
 Created a restricted list to exclude controversial companies
 Limit special cost arrangements (e.g. air travel) from clients
 Limit gifts received from clients
 Restrict personal investments (e.g. equity related IPOs)
 Implement effective supervisory and review procedures
 Establish a formal written policy on IO

Misconduct
 Not engage in any professional conduct involving dishonesty / fraud / deceit
 Not commit any act that adversely affects professional reputation / competence

Misrepresentation
 Untrue statement or omission of facts
 Omission of any statement that is otherwise false and misleading

Duties of Firms
 Develop / Adopt a code of ethics
 Disseminate to staff a list of potential violations and associated punishments
 Check reference of potential staff

Duties of Analysts
 Not knowingly make any misrepresentations relating to investment
 Not misrepresent any aspect of their practice,
including qualifications
 Not guarantee clients specific return on volatile investments
 Can provide clients with info on return of investments with built-in guarantee
 Not commit plagiarism when preparing investment materials
 Acknowledge and identify the source of ideas from other parties
 Can revise outsourced research

Duties of Analysts
 Not commit any sort of unethical behaviour related to professional activities
 Not commit any act that negative affects their ability to perform responsibilities
 Not abuse CFA Conduct by actively seeking enforcement of CFA Conduct

Integrity
Material Nonpublic Info
 Not act or cause others to act on material nonpublic investment info (inside info)
Material Info
 Info that has an impact on the price of a security or affects investment decisions
Nonmaterial info
 Low Reliability
 Ambiguity of Effect 2

Buy the full version of these notes or essay plans and more in our CFA Level 1 Notes.