Concepts Description
Standard of Professional Conduct 1 ‐ 7
1. Professionalism 1. Knowledge of the law : understand and comply with all applicable laws, rules and regulations (must comply with the more strict law, rule and regulation)
Member should :
‐ Keep up with changes in laws, rules and regulations
‐ Separate themselves from prohibited activity ; encourage employer to end that activity
‐ Report violations to governmental autorities is advisable , and required by laws in some countries
2. Independence and Objectivity : must use reasonable care and judgement to achieve and maintain independence and objectivity on their professional activities
‐ Cannot accept gift that might influence the independence and objectivity
‐ Client's gift for past performance is OK, but should be disclosed to employer
‐ Client's bonus for future performance might influence independence and objectivity → should be disclosed to employer
3. Misrepresentation : Must not knowingly make any misrepresentation relating to investment analysis, actions, etc. Violations include :
‐ Plagiarism : using other's work without giving them credit
‐ Guarantee specific return on securities that have no explicit guarantee from government body or financial situation
‐ Select valuation service because it has the highest value on untraded security holding
‐ Select irrelevant performance benchmark
‐ Present performance data / attribution analysis that omits accounts or relevant variables
‐ Offer false / misleading info about capability of analyst or firm
‐ Using misleading 3rd party marketing materials
4. Misconduct : Must not engage in any professional conduct involving dishonesty, fraud, or deceit ; must not commit any act that reflect adversely on their professional reputation,
integrity or competence
2. Integrity of Capital market 1. Material non‐public information : individuals who possess material non‐public information that could affect the value of an investment must not act / cause others to act on the
information
‐ Members may receive material non‐public information when they involve in a certain transactions → Can use those informa on for that transac ons only, unless it becomes public
‐ Not all information from internet / social media is public information → should confirm via company press / regulatory filings
* Mosaic theory : combine public information vs non‐material non‐public information → not viola on
2. Market manipulation : Must not engage in practices that distort prices / artificially inflate trading volume with the intent to mislead market participants
3. Duties to clients 1. Loyalty, prudence and care : have a duty of loyalty to clients, must act with reasonable care and exercise prudnet judgement
‐ Manage client assets in accordance with IPS
‐ Establish investment objectives of clients based on needs and circumstances
‐ Make investment based on total portfolio context
‐ Inform client of any limitation in advisory relationship
‐ Vote proxies in an informed and responsible manner
‐ Submit to client all statements showing all transactions and information, at least quarterly
‐ Diversify
‐ Deal fairly with all client in regards to investment actions
‐ Disclose conflict and compensation arrangements
‐ Client interest first
2. Fair dealing : deal fairly and objectively with all clients.
‐ Different service levels are acceptable
‐ Should not take advantage of their position in the industry to disadvantage clients
‐ Give clients fair opportunitiy to act upon every recommendation
‐ Treat client fairly, based on their investment objectives and circumstances
‐ Treat individual and institutional clients fairly
3. Suitability :
‐ In advisory relationship
+ Make reasonable inquiry into client's investment experience, risk and return objectives, financial constraints prior to making any investment recommendation / taking
investment action. This information must be reassessed and updated regularly
+ Determine that an investment is suitable to the client's financial situation, and consistent with the written objectives, mandates and constraints prior to making any investment
recommendation / taking investment action
+ Judge the suitability of investments in context of the client's total portfolio
‐ In managing a portfolio : only make recommendations / actions that are consistent with the stated objectives and constraints of the portfolio. In case receive a request from client
to purchase an unsuitable security :
+ Minimal effect on the risk/return profile of the portfolio : follow the firm's policy, and communicate with the client on the reason for unsuitableness
+ Material effect on the risk/return profile of the portfolio : Update the Investment Policy Statement (IPS); or make a separate client‐directed account
4. Performance presentation : must make reasonable efforst to ensure the investment performance communicated to client is fair, accurate and complete
‐ Avoid mistating performance / misleading client about investment performance
‐ Should not state / imply the ability to achieve rate of return sumular to past performance
‐ Must make detailed information available upon request
‐ Present performance of weighted composite of similar portfolio, rather than a single account
‐ Include terminated accounts as historical performance with clearly state when they were terminated
5. Preservations of Confidentiality : must keep client's information confidential, unless (1) the information converns illegal activities; (2) require by law; or (3) permit from client
Standard of Professional Conduct 1 ‐ 7
1. Professionalism 1. Knowledge of the law : understand and comply with all applicable laws, rules and regulations (must comply with the more strict law, rule and regulation)
Member should :
‐ Keep up with changes in laws, rules and regulations
‐ Separate themselves from prohibited activity ; encourage employer to end that activity
‐ Report violations to governmental autorities is advisable , and required by laws in some countries
2. Independence and Objectivity : must use reasonable care and judgement to achieve and maintain independence and objectivity on their professional activities
‐ Cannot accept gift that might influence the independence and objectivity
‐ Client's gift for past performance is OK, but should be disclosed to employer
‐ Client's bonus for future performance might influence independence and objectivity → should be disclosed to employer
3. Misrepresentation : Must not knowingly make any misrepresentation relating to investment analysis, actions, etc. Violations include :
‐ Plagiarism : using other's work without giving them credit
‐ Guarantee specific return on securities that have no explicit guarantee from government body or financial situation
‐ Select valuation service because it has the highest value on untraded security holding
‐ Select irrelevant performance benchmark
‐ Present performance data / attribution analysis that omits accounts or relevant variables
‐ Offer false / misleading info about capability of analyst or firm
‐ Using misleading 3rd party marketing materials
4. Misconduct : Must not engage in any professional conduct involving dishonesty, fraud, or deceit ; must not commit any act that reflect adversely on their professional reputation,
integrity or competence
2. Integrity of Capital market 1. Material non‐public information : individuals who possess material non‐public information that could affect the value of an investment must not act / cause others to act on the
information
‐ Members may receive material non‐public information when they involve in a certain transactions → Can use those informa on for that transac ons only, unless it becomes public
‐ Not all information from internet / social media is public information → should confirm via company press / regulatory filings
* Mosaic theory : combine public information vs non‐material non‐public information → not viola on
2. Market manipulation : Must not engage in practices that distort prices / artificially inflate trading volume with the intent to mislead market participants
3. Duties to clients 1. Loyalty, prudence and care : have a duty of loyalty to clients, must act with reasonable care and exercise prudnet judgement
‐ Manage client assets in accordance with IPS
‐ Establish investment objectives of clients based on needs and circumstances
‐ Make investment based on total portfolio context
‐ Inform client of any limitation in advisory relationship
‐ Vote proxies in an informed and responsible manner
‐ Submit to client all statements showing all transactions and information, at least quarterly
‐ Diversify
‐ Deal fairly with all client in regards to investment actions
‐ Disclose conflict and compensation arrangements
‐ Client interest first
2. Fair dealing : deal fairly and objectively with all clients.
‐ Different service levels are acceptable
‐ Should not take advantage of their position in the industry to disadvantage clients
‐ Give clients fair opportunitiy to act upon every recommendation
‐ Treat client fairly, based on their investment objectives and circumstances
‐ Treat individual and institutional clients fairly
3. Suitability :
‐ In advisory relationship
+ Make reasonable inquiry into client's investment experience, risk and return objectives, financial constraints prior to making any investment recommendation / taking
investment action. This information must be reassessed and updated regularly
+ Determine that an investment is suitable to the client's financial situation, and consistent with the written objectives, mandates and constraints prior to making any investment
recommendation / taking investment action
+ Judge the suitability of investments in context of the client's total portfolio
‐ In managing a portfolio : only make recommendations / actions that are consistent with the stated objectives and constraints of the portfolio. In case receive a request from client
to purchase an unsuitable security :
+ Minimal effect on the risk/return profile of the portfolio : follow the firm's policy, and communicate with the client on the reason for unsuitableness
+ Material effect on the risk/return profile of the portfolio : Update the Investment Policy Statement (IPS); or make a separate client‐directed account
4. Performance presentation : must make reasonable efforst to ensure the investment performance communicated to client is fair, accurate and complete
‐ Avoid mistating performance / misleading client about investment performance
‐ Should not state / imply the ability to achieve rate of return sumular to past performance
‐ Must make detailed information available upon request
‐ Present performance of weighted composite of similar portfolio, rather than a single account
‐ Include terminated accounts as historical performance with clearly state when they were terminated
5. Preservations of Confidentiality : must keep client's information confidential, unless (1) the information converns illegal activities; (2) require by law; or (3) permit from client
