Investment Management 354
Ethics
Standard I: Professionalism
Standard I(A): Knowledge of the Law
Notification of Known Violations:
(Over stating earnings)
- Seek legal counsel and report to supervisor.
Dissociating from a Violation:
(Concealing losses)
(Concealing accounts)
(Misrepresentation of Performance)
- Report to supervisor, if from does not dissociate, then member should dissociate and seek legal
counsel.
- Do not pass along incorrect information
Following the Highest Requirements:
- Law or Code of ethics, whichever is higher
- Follow the law of your country or firm over local laws, whichever is higher
Reporting Potential Unethical Actions:
(Not sure where suspicious information is coming from)
- Follow firm policies, advocate for disclosure about the information
Failure to Maintain Knowledge of the Law:
- Keep in complies with new laws
Standard I(B): Independence and Objectivity
Travel Expenses:
(No extravagant of lavish spending)
(Use your own judgment)
Research Independence:
(Cannot be paid to provide a positive report)
(Must not be coerced into providing a false report)
(Only look at company fundamentals to proved a report)
(Compensation for performance must not affect investment choices)
- In anticipation of an offering, place the investment offering on the restricted list for your sales
force
- If forced to have a result on a report, you can say that you cannot conduct research under these
constraints, or if your report is in conflict with the desired outcome, inform supervisors so they
can make recommendations.
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,Investment Management 354
Gifts and Entertainment:
(Receiving excessive gifts)
(Can receive gifts and bonuses if reported to supervisors)
- Must report, and make sure they do not impede your independence or objectivity
- You must disclose your gifts received
- Must pay for your own basic travel and accommodation expenses on a business trip
- Only interact with the other sermon executives in a work related context
Research Independence and Compensation Agreements
(Do not accept compensation agreements that rely on you providing a falsely positive report)
(Do not let fee arrangements to import your independence and objectivity)
(Cannot be paid to deliver employment outcomes)
- Must report errors with other account in final report, must not let personal relationships impact
this.
Standard I(C): Misrepresentation
Disclosure of Issuer-Paid Research:
(Cannot be paid to promote certain stocks and mislead investors)
(Must disclose compensation arrangements)
Correction of Unintentional Errors:
- Stop the distribution, and notify people who have seen it about the error
Non-correction of Known Errors:
- Must fix errors as soon as they are noticed, and if they are know, must not be distributed
Plagiarism:
- Must not reuse major parts of another report without citing the original writer
- Need to add your own analysis and conclusions before you can sign-off on a report
- Do not take credit for others innovations or work
- Cannot copy even pain language descriptions, use your own words
- Cite the original source of information, try get a copy for the original issuer, only site the
intermediary source if you use their information or opinions.
- Can rely on third-party research that has a reasonable and adequate basis, but do not distribute
it as your own work.
Misrepresentation of Information:
- Must not say something about a financial device, that is incorrect
- Must clearly specify how something is guaranteed, might not be a violation, but need to
explain who and how it is.
- Cannot mislead investors as to the performance or riskiness of financial devices.
- Must not rely on programs that your investment team cannot understand.
- Cannot cherry pick accounts to be included in a report
- Do not provide people with knowingly out of date information
- Do not overstate firm results
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,Investment Management 354
Standard I(D): Misconduct
Professionalism and Competence:
- Do not invest drunk
- Your actions must not negatively affect your images of professionalism and competence
- Must not damage image of yourself, employed and industry
Fraud and Deceit:
- Do not engage if fraud and deceit that adversely reflect on your integrity
- Do not grange in actions that involve dishonesty, fraud and misrepresentation
- Actions within the workspace
Personal Actions and Integrity:
- Do not engage in activities outside the workspace that reflect poorly on your professional
reputation, integrity or competence.
Professional Misconduct:
(Coming across errors in policy, procedures or compliance)
- Gather proof of her reason of doubt
- Report to appropriate regulator
Standard II: Integrity of Capital Markets
Standard II(A): Material Nonpublic Information
Acting on Nonpublic Information:
- Distributing and action on Information regarding a pending sale from an inside source is
regarded as distributing material and nonpublic information.
- It it a members responsibility to ensure that inflation being acting on in not material non-public
information, even if you trust the source.
Controlling Nonpublic Information:
- Must prevent the transfer and misuse of material non-public inflation to others
Selective Disclosure of Material Information:
- Ensure that information that you intend to act on is accessible to by the public
Determining Materiality:
- Unreliable information is not considered material and thus can be acted on
Applying the Mosaic Theory:
- You can use public information and non-material nonpublic information, you can use non-public
information from people who are not in the company. You can combine these two to have a
similar effect as material nonpublic information.
- Advice from inside needs to be weighed against public inflation to determine if it is considered
material
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, Investment Management 354
Analyst Recommendations as Material Nonpublic Information:
- Cannot act on material nonpublic inflation, as the report has not been released and if they are
not a client.
Using a Expert Network
- You may rely on experts in the field, however not ones within the company that you are
researching.
Standard II(B): Market Manipulation
Independent Analysis and Company Promotion:
- Cannot use inaccurate reporting and misleading information to artificially manipulate the price
of a stock.
Personal Trading Practices:
- Cannot create rumours and false create the image of greater investor interest though trading
internally to manipulate the price of a stock.
- Cannot create an artificially high trading volume and price by trading with yourself
- Cannot artificially manipulate the liquidity of the market (pump-priming)
Creating Artificial Price Volatility:
- Cannot release a report to sensationalise a particular message which is designed to have an
impact of the price or volatility of the share.
Manipulating Model Inputs:
- Cannot adjust the inputs in a model to minimise associated risk to achieve higher ratings
Information Manipulation:
- Can not act as someone else to manipulate the market, even if you do not gain.
Standard III: Duties to Clients
Standard III(A): Loyalty Prudence and Care
Identify the Client:
- Only make investment decisions that best interest your client
- Have loyalty with the client that the only reason you buy a stock is to benefit them
- You have to treat your family like any other fee-paying client
Commission Practices
- Find the firm with the lowest cost for the services/best results
- You may choose an expensive investment advisor, but have to be able to justify it.
- Cannot receive compensation for choosing an investment advisor
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Ethics
Standard I: Professionalism
Standard I(A): Knowledge of the Law
Notification of Known Violations:
(Over stating earnings)
- Seek legal counsel and report to supervisor.
Dissociating from a Violation:
(Concealing losses)
(Concealing accounts)
(Misrepresentation of Performance)
- Report to supervisor, if from does not dissociate, then member should dissociate and seek legal
counsel.
- Do not pass along incorrect information
Following the Highest Requirements:
- Law or Code of ethics, whichever is higher
- Follow the law of your country or firm over local laws, whichever is higher
Reporting Potential Unethical Actions:
(Not sure where suspicious information is coming from)
- Follow firm policies, advocate for disclosure about the information
Failure to Maintain Knowledge of the Law:
- Keep in complies with new laws
Standard I(B): Independence and Objectivity
Travel Expenses:
(No extravagant of lavish spending)
(Use your own judgment)
Research Independence:
(Cannot be paid to provide a positive report)
(Must not be coerced into providing a false report)
(Only look at company fundamentals to proved a report)
(Compensation for performance must not affect investment choices)
- In anticipation of an offering, place the investment offering on the restricted list for your sales
force
- If forced to have a result on a report, you can say that you cannot conduct research under these
constraints, or if your report is in conflict with the desired outcome, inform supervisors so they
can make recommendations.
1 of 47
,Investment Management 354
Gifts and Entertainment:
(Receiving excessive gifts)
(Can receive gifts and bonuses if reported to supervisors)
- Must report, and make sure they do not impede your independence or objectivity
- You must disclose your gifts received
- Must pay for your own basic travel and accommodation expenses on a business trip
- Only interact with the other sermon executives in a work related context
Research Independence and Compensation Agreements
(Do not accept compensation agreements that rely on you providing a falsely positive report)
(Do not let fee arrangements to import your independence and objectivity)
(Cannot be paid to deliver employment outcomes)
- Must report errors with other account in final report, must not let personal relationships impact
this.
Standard I(C): Misrepresentation
Disclosure of Issuer-Paid Research:
(Cannot be paid to promote certain stocks and mislead investors)
(Must disclose compensation arrangements)
Correction of Unintentional Errors:
- Stop the distribution, and notify people who have seen it about the error
Non-correction of Known Errors:
- Must fix errors as soon as they are noticed, and if they are know, must not be distributed
Plagiarism:
- Must not reuse major parts of another report without citing the original writer
- Need to add your own analysis and conclusions before you can sign-off on a report
- Do not take credit for others innovations or work
- Cannot copy even pain language descriptions, use your own words
- Cite the original source of information, try get a copy for the original issuer, only site the
intermediary source if you use their information or opinions.
- Can rely on third-party research that has a reasonable and adequate basis, but do not distribute
it as your own work.
Misrepresentation of Information:
- Must not say something about a financial device, that is incorrect
- Must clearly specify how something is guaranteed, might not be a violation, but need to
explain who and how it is.
- Cannot mislead investors as to the performance or riskiness of financial devices.
- Must not rely on programs that your investment team cannot understand.
- Cannot cherry pick accounts to be included in a report
- Do not provide people with knowingly out of date information
- Do not overstate firm results
2 of 47
,Investment Management 354
Standard I(D): Misconduct
Professionalism and Competence:
- Do not invest drunk
- Your actions must not negatively affect your images of professionalism and competence
- Must not damage image of yourself, employed and industry
Fraud and Deceit:
- Do not engage if fraud and deceit that adversely reflect on your integrity
- Do not grange in actions that involve dishonesty, fraud and misrepresentation
- Actions within the workspace
Personal Actions and Integrity:
- Do not engage in activities outside the workspace that reflect poorly on your professional
reputation, integrity or competence.
Professional Misconduct:
(Coming across errors in policy, procedures or compliance)
- Gather proof of her reason of doubt
- Report to appropriate regulator
Standard II: Integrity of Capital Markets
Standard II(A): Material Nonpublic Information
Acting on Nonpublic Information:
- Distributing and action on Information regarding a pending sale from an inside source is
regarded as distributing material and nonpublic information.
- It it a members responsibility to ensure that inflation being acting on in not material non-public
information, even if you trust the source.
Controlling Nonpublic Information:
- Must prevent the transfer and misuse of material non-public inflation to others
Selective Disclosure of Material Information:
- Ensure that information that you intend to act on is accessible to by the public
Determining Materiality:
- Unreliable information is not considered material and thus can be acted on
Applying the Mosaic Theory:
- You can use public information and non-material nonpublic information, you can use non-public
information from people who are not in the company. You can combine these two to have a
similar effect as material nonpublic information.
- Advice from inside needs to be weighed against public inflation to determine if it is considered
material
3 of 47
, Investment Management 354
Analyst Recommendations as Material Nonpublic Information:
- Cannot act on material nonpublic inflation, as the report has not been released and if they are
not a client.
Using a Expert Network
- You may rely on experts in the field, however not ones within the company that you are
researching.
Standard II(B): Market Manipulation
Independent Analysis and Company Promotion:
- Cannot use inaccurate reporting and misleading information to artificially manipulate the price
of a stock.
Personal Trading Practices:
- Cannot create rumours and false create the image of greater investor interest though trading
internally to manipulate the price of a stock.
- Cannot create an artificially high trading volume and price by trading with yourself
- Cannot artificially manipulate the liquidity of the market (pump-priming)
Creating Artificial Price Volatility:
- Cannot release a report to sensationalise a particular message which is designed to have an
impact of the price or volatility of the share.
Manipulating Model Inputs:
- Cannot adjust the inputs in a model to minimise associated risk to achieve higher ratings
Information Manipulation:
- Can not act as someone else to manipulate the market, even if you do not gain.
Standard III: Duties to Clients
Standard III(A): Loyalty Prudence and Care
Identify the Client:
- Only make investment decisions that best interest your client
- Have loyalty with the client that the only reason you buy a stock is to benefit them
- You have to treat your family like any other fee-paying client
Commission Practices
- Find the firm with the lowest cost for the services/best results
- You may choose an expensive investment advisor, but have to be able to justify it.
- Cannot receive compensation for choosing an investment advisor
4 of 47
