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
, 4. Duties to employers 1. Loyalty : must act for the benefit of their employer. Not deprive their employer of the advantage of their skills, ability, divulge confidential information. Not cause harm to the
employer.
‐ Employer should not have incentive / compensation system that encourage unethical behaviour
‐ Other compensation is allowed if there is a notification provided to employer fully describing all aspect of the services (compensation, duration, nature of the service)
‐ When leaving an employer, continue to act in employer's best interest until resignition. Violation includes:
+ misappropriate of trade secrets
+ Misuse of confidential information
+ Soliciting employer's client prior to leaving
+ Self‐dealing
+ Misappropriation of client lists
‐ Employers records on any device are firm's property
‐ After leaving an employer, simple knowledge of name of formal client , and experience + knowledge gained while working with former employer are not prohibited from using,
except when there is agreement exist
2. Additional compensation arrangements : must not accept gifts, benefits, compensations, or consideration that create a conflict of interest with the employer, unless they obtain
written consent from all parties involved
‐ Client's bonus depdends on future performance : written consent are required in advance
‐ Client's bonus based on past performance : Disclosure to employer is required
3. Responsibilities of supervisors : ensure anyone under supervision comply with applicable laws, rules, regulations and the Code of Standards
5. Investment analysis, 1. Diligence and reasonable basis :
recommendations and actions ‐ Exercise diligence, independence, thoroughness in investment analysis, recommendation and actions
‐ Have reasonable, adequate, well‐supported basis for any investment analysis, recommendation and actions
‐ List of factors need to be considered include:
+ Global and national econ conditions
+ Firm's financial result, operating history and cycle stage
+ Fees and historical result of funds
+ Limitations of any quantitative models used
+ Determination whether peer group comparisons for valuation are appropriate
‐ When using 3rd party research:
+ Review assumptions used
+ Determine the accuracy of the analysis
+ Determine the timeliness of the research
+ Evaluate the objectivity and independence of the recommendation
‐ If a member does not agree with the independent and objective view of the group, he does not have to decline to be identified with the report
2. Communication with Clients :
‐ Disclose basic format, general principles, and significant changes of the investment processes
‐ Disclose and update any change in the limitations and risks related to the investment process
‐ Identify important factors and communicate with clients
‐ Distinguish between fact and opinion in the presentation
3. Record retention : maintain record to support investment analysis, recommendations and actions (minimum 7 years as in the Standard)
6. Conflict of interest 1. Disclosure of Conflicts : must make full and fair diclosure all matters expected to affect the independence and objectivity, or affect their duties to clients and employer (e.g.: actual
ownership of stock that the member recommends or that client hold ; compensation/bonus structure).
‐ All potential area of conflict should be disclosed → clients could judge the mo ve and poten al biased. Common conflicts are :
+ ownership of stock that member recommends / client holds
+ member's compensation / bonus structure
‐ Must give employer enough information to judge the impact of conflict
2. Priority of transactions : Priority of investment transactions for clients and employers > Priority of self‐investment transactions
‐ Personal transactions could only br undertaken after client and employer have adequate opprtunity to act on a recommendation
‐ Family member accounts that are client accounts should be treated as any other client account
3. Referral fees : must disclose to employer and clients any referrals fees paid for, or received from others for product recommendation
7. Responsibilities as a CFA 1. Conduct as participants in CFA Institute programs : must not engage in any conduct that affect the reputation and integrity of CFA Institute, includes:
Institute member ‐ Cheat on CFA exam or any exam
‐ Reveal information about topic tested, content of the exam questions, formulas used/not used in the exam
‐ Not following rules and policies of CFA program
‐ Give confidential information on the CFA Program to candidates or public
‐ Improperly using the title ro further personal and professional goals
‐ Misrepresent information on the Professional Conduct Statement (PSC) or the CFA Institute Professional Development Program
2. Reference to CFA Institute : must not misrepresent / exaggerate the meaning or implications of membership of CFA Institute, holding CFA designition or candidacy in CFA program
‐ Sign the PCS annually
‐ Pay CFA Institute membership dues annually
‐ Do not misrepresent / exaggerate the meaning of CFA designation. There is no partial CFA designition
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
, 4. Duties to employers 1. Loyalty : must act for the benefit of their employer. Not deprive their employer of the advantage of their skills, ability, divulge confidential information. Not cause harm to the
employer.
‐ Employer should not have incentive / compensation system that encourage unethical behaviour
‐ Other compensation is allowed if there is a notification provided to employer fully describing all aspect of the services (compensation, duration, nature of the service)
‐ When leaving an employer, continue to act in employer's best interest until resignition. Violation includes:
+ misappropriate of trade secrets
+ Misuse of confidential information
+ Soliciting employer's client prior to leaving
+ Self‐dealing
+ Misappropriation of client lists
‐ Employers records on any device are firm's property
‐ After leaving an employer, simple knowledge of name of formal client , and experience + knowledge gained while working with former employer are not prohibited from using,
except when there is agreement exist
2. Additional compensation arrangements : must not accept gifts, benefits, compensations, or consideration that create a conflict of interest with the employer, unless they obtain
written consent from all parties involved
‐ Client's bonus depdends on future performance : written consent are required in advance
‐ Client's bonus based on past performance : Disclosure to employer is required
3. Responsibilities of supervisors : ensure anyone under supervision comply with applicable laws, rules, regulations and the Code of Standards
5. Investment analysis, 1. Diligence and reasonable basis :
recommendations and actions ‐ Exercise diligence, independence, thoroughness in investment analysis, recommendation and actions
‐ Have reasonable, adequate, well‐supported basis for any investment analysis, recommendation and actions
‐ List of factors need to be considered include:
+ Global and national econ conditions
+ Firm's financial result, operating history and cycle stage
+ Fees and historical result of funds
+ Limitations of any quantitative models used
+ Determination whether peer group comparisons for valuation are appropriate
‐ When using 3rd party research:
+ Review assumptions used
+ Determine the accuracy of the analysis
+ Determine the timeliness of the research
+ Evaluate the objectivity and independence of the recommendation
‐ If a member does not agree with the independent and objective view of the group, he does not have to decline to be identified with the report
2. Communication with Clients :
‐ Disclose basic format, general principles, and significant changes of the investment processes
‐ Disclose and update any change in the limitations and risks related to the investment process
‐ Identify important factors and communicate with clients
‐ Distinguish between fact and opinion in the presentation
3. Record retention : maintain record to support investment analysis, recommendations and actions (minimum 7 years as in the Standard)
6. Conflict of interest 1. Disclosure of Conflicts : must make full and fair diclosure all matters expected to affect the independence and objectivity, or affect their duties to clients and employer (e.g.: actual
ownership of stock that the member recommends or that client hold ; compensation/bonus structure).
‐ All potential area of conflict should be disclosed → clients could judge the mo ve and poten al biased. Common conflicts are :
+ ownership of stock that member recommends / client holds
+ member's compensation / bonus structure
‐ Must give employer enough information to judge the impact of conflict
2. Priority of transactions : Priority of investment transactions for clients and employers > Priority of self‐investment transactions
‐ Personal transactions could only br undertaken after client and employer have adequate opprtunity to act on a recommendation
‐ Family member accounts that are client accounts should be treated as any other client account
3. Referral fees : must disclose to employer and clients any referrals fees paid for, or received from others for product recommendation
7. Responsibilities as a CFA 1. Conduct as participants in CFA Institute programs : must not engage in any conduct that affect the reputation and integrity of CFA Institute, includes:
Institute member ‐ Cheat on CFA exam or any exam
‐ Reveal information about topic tested, content of the exam questions, formulas used/not used in the exam
‐ Not following rules and policies of CFA program
‐ Give confidential information on the CFA Program to candidates or public
‐ Improperly using the title ro further personal and professional goals
‐ Misrepresent information on the Professional Conduct Statement (PSC) or the CFA Institute Professional Development Program
2. Reference to CFA Institute : must not misrepresent / exaggerate the meaning or implications of membership of CFA Institute, holding CFA designition or candidacy in CFA program
‐ Sign the PCS annually
‐ Pay CFA Institute membership dues annually
‐ Do not misrepresent / exaggerate the meaning of CFA designation. There is no partial CFA designition
