2010 level 3 schwesers secret sauce
STUDY SESSION 1 – ETHICAL AND PROFESSIONAL STANDARDS
CFA INSTITUTE CODE OF ETHICS AND STANDARDS OF PROFESSIONAL
Cross-Reference to CFA Institute Assigned Readings #1 & 2
Ethics will be tested in two selected resp9nse item sets. The distracters (incorrect
choices) will all appear indistinguishable unless you have learned to think in the
spirit of the Code and Standards. The best way to do this is through the practice
questions contained in the Handbook and Book 1 of the SchweserNotesTM.
As you read this material, keep in mind that it is assumed you have already
read/studied the Code and Standards and our coverage in the SchweserNotes. As
such, this material represents a downsizing of the material in our SchweserNotes
without the LOS, concept checkers, applications (examples), and cases. Given
a familiarity with the Code and Standards, this critical core of the Code and
Standards should be all you need for that last push before the exam.
Members ofCFA Institute, including Chartered Financial Analyst® (CFA®)
charterholders, and Candidates for the CFA designation (~’Members and
Candidates") must: 1
Act with integrity, competence, diligence, respect, and in an ethical manner with
. the public, clients, prospective clients, employers, employees, colleagues in the
investment profession, and other participants in the global capital markets.
Place the integrity of the investment profession and the interests of clients above
their own personal interests.
I Study Sessions 1 & 2
Use reasonable care and exercise independent professional judgment when
conducting investment analysis, making investment recommendations, taking
investment actions, and engaging in other professional activities.
Practice and encourage others to practice in a professional and ethical manner
that will reflect credit on themselves and the profession.
Promote the integrity of, and uphold the rules governing, capital markets.
Maintain and improve their professional competence and strive to maintain and
improve the competence ofother investment professionals.
GUIDANCE FOR STANDARDS I-VII
I(A). Knowledge of the Law. Members must understand and comply with
laws, rules, regulations, and Code and Standards of any authority governing their
activities. In the event of a conflict, follow the more strict law, rule, or regulation.
Members must know the laws and regulations relating to dteir professional
activities in all countries in which they conduct business. Do not violate Code or
Standards even if the activity is otherwise legal. Always adhere to the most strict
rules and requirements (law or CPA Institute Standards) that apply.
Dissociate from any ongoing client or employee activity that is illegal or unethical,
even if it involves leaving an employer (an extreme case). While a Member
may confront the involved individual first, he must approach his supervisor or
compliance department. Inaction with continued association may be construed as
Recommended Procedures for Compliance
Members should keep up with changes in applicable laws, rules, and regulations:
Review compliance procedures on an ongoing basis to assure that they address
cutrent law, CPAl Standards, and regulations.
Maintain current reference materials.
Seek advice of counsel or compliance department when in doubt.
Document any violations when they disassociate themselves from prohibited
activity and encourage employers to bring an end to such activities.
There is no requirement under the Standards to report violations to
governmental authorities, but this may be advisable in some circumstances and
required by law in others.
Members should encourage their firms to:
Develop and/or adopt a code ofethics~
Make information available that highlights applicable laws and regulations.
Establish written procedures for reporting suspected violations.
I(B). Independence and Objectivity. Use reasonable care to exercise
independence and objectivityin professional activities. Do not offer, solicit, or
accept any gift, benefit, compensation, or consideration that would compromise
independence and objectivity.
Do not let the investment process be influenced by any external sources. Modest
.gifts are permitted. Allocation of shares in oversubscribed IPOs to personal
accounts is NOT permitted. Distinguish between gifts from clients and gifts from
entities seeking influence to the detriment of any client. Gifts must be disclosed to
the Member’s employer in any case.