Reading 1_Code of Ethics and Standard of
Professional Conduct Guidance for
Standards I-VII
,Professional Conduct Program
The CFA Institute Professional Conduct Program is covered by the CFA Institute
Bylaws and the Rules of Procedure for Proceedings Related to Professional
Conduct. The Program is based on the principles of fairness of the process to
members and candidates and maintaining the confidentiality of the
proceedings.
The Disciplinary Review Committee of the CFA Institute Board of Governors
has overall responsibility for the Professional Conduct Program and
enforcement of the Code and Standards.
The CFA Institute Professional Conduct staff conducts inquiries related to
professional conduct. Several circumstances can prompt such an inquiry:
1) Self-disclosure by members or candidates on their annual Professional
Conduct Statements of involvement in civil litigation or a criminal
investigation, or that the member or candidate is the subject of a written
complaint.
2) Written complaints about a member or candidate’s professional conduct
that are received by the Professional Conduct staff.
3) Evidence of misconduct by a member or candidate that the Professional
Conduct staff received through public sources, such as a media article or
broadcast.
4) A report by a CFA exam proctor of a possible violation during the
examination.
5) Analysis of exam materials and monitoring of social media by CFA Institute.
Once an inquiry has begun, the Professional Conduct staff may request (in
writing) an explanation from the subject member or candidate and may: (1)
interview the subject member or candidate, (2) interview the complainant or
other third parties, and/or (3) collect documents and records relevant to the
investigation.
The Professional Conduct staff may decide: (1) that NO disciplinary sanctions
are appropriate, (2) to issue a cautionary letter, or (3) to discipline the
member or candidate. In a case where the Professional Conduct staff finds a
violation has occurred and proposes a disciplinary sanction, the member or
candidate may accept or reject the disciplinary sanction. If the member or
candidate chooses to reject the sanction, the matter will be referred to a
disciplinary review panel of CFA Institute members for a hearing. Sanctions
imposed may include condemnation by the member’s peers or suspension of
candidate’s continued participation in the CFA Program.
,Code of Ethics
Act with integrity, competence, diligence, respect and in ethical manner with
the public, clients, prospective clients, employers, employees, colleagues and
other market participants
Place integrity of the investment profession and interest of client above
personal interest
Use reasonable care and exercise independent professional judgement
Practice and encourage others to practice in a professional and ethical manner
that will reflect credit on members and their profession
Promote and uphold integrity in governing capital markets
Maintain and improve professional competence among investment
professions
, Standard of Professional Conduct
For the exam: the “reason” does NOT change the requirement of the Standard. If you are prohibited from
some action, the motivations for the action or other circumstances simply do NOT matter
Professionalism
Knowledge of the law:
Update understanding of applicable laws and regulatory standards relating to his
position. Relying only on firm policies and procedures is NOT sufficient.
Members can violate this Standard just by NOT knowing the applicable laws, rules and
regulations
In the event of conflict, must comply with the more restrict law, rule or regulation
Must NOT knowingly participate or assist in any violation of laws, rules or regulations
Must disassociate themselves from any violation
Inaction with continued association may be constructed as knowing participation
Members should have procedures to keep up with changes in applicable laws
Any violation of the Code and Standards will also violate this
subsection***
If you know that violations of applicable rules or laws are taking place, either by co-workers
or clients, you must approach your supervisor or compliance department to remedy the
situation. If they will NOT or cannot, then you must dissociate from the activity (e.g., NOT
working with a trading group you know is NOT allocating client trades properly according to
the Standard on Fair Dealing, or NOT using marketing materials that you know or should
know are misleading or erroneous). If this cannot be accomplished, you may, in an extreme
case, have to resign from the firm to be in compliance with this Standard.
Mere disassociation is NOT enough --> must report to compliance***
The Standard does NOT require members to report legal violations to
the appropriate governmental or regulatory organizations, but such
disclosures may be appropriate under certain circumstances***
Recommendations for Members:
Establish, or encourage employer to establish, procedures to keep employees informed
of changes in relevant laws, rules, and regulations.
Review, or encourage employer to review, the firm’s written compliance procedures on
a regular basis
Maintain, or encourage employer to maintain, copies of current laws, rules, and
regulations
When in doubt about legality, consult supervisor, compliance personnel, or a lawyer.
When dissociating from violations, keep records documenting the violations, encourage
employer to bring an end to the violations.
There is NO requirement in the Standards to report wrongdoers, but
local law may require it; members are “strongly encouraged” to report
violations to CFA Institute Professional Conduct Program.
Recommendations for Firms:
Have a code of ethics
Have procedures for reporting suspected violations.
Professional Conduct Guidance for
Standards I-VII
,Professional Conduct Program
The CFA Institute Professional Conduct Program is covered by the CFA Institute
Bylaws and the Rules of Procedure for Proceedings Related to Professional
Conduct. The Program is based on the principles of fairness of the process to
members and candidates and maintaining the confidentiality of the
proceedings.
The Disciplinary Review Committee of the CFA Institute Board of Governors
has overall responsibility for the Professional Conduct Program and
enforcement of the Code and Standards.
The CFA Institute Professional Conduct staff conducts inquiries related to
professional conduct. Several circumstances can prompt such an inquiry:
1) Self-disclosure by members or candidates on their annual Professional
Conduct Statements of involvement in civil litigation or a criminal
investigation, or that the member or candidate is the subject of a written
complaint.
2) Written complaints about a member or candidate’s professional conduct
that are received by the Professional Conduct staff.
3) Evidence of misconduct by a member or candidate that the Professional
Conduct staff received through public sources, such as a media article or
broadcast.
4) A report by a CFA exam proctor of a possible violation during the
examination.
5) Analysis of exam materials and monitoring of social media by CFA Institute.
Once an inquiry has begun, the Professional Conduct staff may request (in
writing) an explanation from the subject member or candidate and may: (1)
interview the subject member or candidate, (2) interview the complainant or
other third parties, and/or (3) collect documents and records relevant to the
investigation.
The Professional Conduct staff may decide: (1) that NO disciplinary sanctions
are appropriate, (2) to issue a cautionary letter, or (3) to discipline the
member or candidate. In a case where the Professional Conduct staff finds a
violation has occurred and proposes a disciplinary sanction, the member or
candidate may accept or reject the disciplinary sanction. If the member or
candidate chooses to reject the sanction, the matter will be referred to a
disciplinary review panel of CFA Institute members for a hearing. Sanctions
imposed may include condemnation by the member’s peers or suspension of
candidate’s continued participation in the CFA Program.
,Code of Ethics
Act with integrity, competence, diligence, respect and in ethical manner with
the public, clients, prospective clients, employers, employees, colleagues and
other market participants
Place integrity of the investment profession and interest of client above
personal interest
Use reasonable care and exercise independent professional judgement
Practice and encourage others to practice in a professional and ethical manner
that will reflect credit on members and their profession
Promote and uphold integrity in governing capital markets
Maintain and improve professional competence among investment
professions
, Standard of Professional Conduct
For the exam: the “reason” does NOT change the requirement of the Standard. If you are prohibited from
some action, the motivations for the action or other circumstances simply do NOT matter
Professionalism
Knowledge of the law:
Update understanding of applicable laws and regulatory standards relating to his
position. Relying only on firm policies and procedures is NOT sufficient.
Members can violate this Standard just by NOT knowing the applicable laws, rules and
regulations
In the event of conflict, must comply with the more restrict law, rule or regulation
Must NOT knowingly participate or assist in any violation of laws, rules or regulations
Must disassociate themselves from any violation
Inaction with continued association may be constructed as knowing participation
Members should have procedures to keep up with changes in applicable laws
Any violation of the Code and Standards will also violate this
subsection***
If you know that violations of applicable rules or laws are taking place, either by co-workers
or clients, you must approach your supervisor or compliance department to remedy the
situation. If they will NOT or cannot, then you must dissociate from the activity (e.g., NOT
working with a trading group you know is NOT allocating client trades properly according to
the Standard on Fair Dealing, or NOT using marketing materials that you know or should
know are misleading or erroneous). If this cannot be accomplished, you may, in an extreme
case, have to resign from the firm to be in compliance with this Standard.
Mere disassociation is NOT enough --> must report to compliance***
The Standard does NOT require members to report legal violations to
the appropriate governmental or regulatory organizations, but such
disclosures may be appropriate under certain circumstances***
Recommendations for Members:
Establish, or encourage employer to establish, procedures to keep employees informed
of changes in relevant laws, rules, and regulations.
Review, or encourage employer to review, the firm’s written compliance procedures on
a regular basis
Maintain, or encourage employer to maintain, copies of current laws, rules, and
regulations
When in doubt about legality, consult supervisor, compliance personnel, or a lawyer.
When dissociating from violations, keep records documenting the violations, encourage
employer to bring an end to the violations.
There is NO requirement in the Standards to report wrongdoers, but
local law may require it; members are “strongly encouraged” to report
violations to CFA Institute Professional Conduct Program.
Recommendations for Firms:
Have a code of ethics
Have procedures for reporting suspected violations.
