CFA Fundamentals 2

  1. Ethics
    Set of moral principles. Conduct governing individual or group
  2. Culture of Integrity (4)
    • 1. High Standards in writing
    • 2. Ongoing training on standards
    • 3. Assess integrity of groups you work with
    • 4. Take action when there are breaches
  3. Ethical Dilemmas
    Situations in which values, interests, rules are potentially in conflict
  4. Obligations to Clients (4)
    Clients interests should come before firm's and individual's interests

    • 1. Requisite knowledge & skills
    • 2. Managing risks
    • 3. Safeguarding client info
    • 4. Treating clients fairly, consistently
  5. Churning
    Excessively trading assets in a client's portfolio to earn higher trading commissions. 

    CONFLICT OF INTEREST
  6. Front Running
    Broker executes personal buy order before executing a large client buy order to reap benefit of higher market prices caused by client's order. 

    CONFLICT OF INTEREST
  7. Obligations to Employers (4)
    • 1. Provide services as agreed in contract
    • 2. Follow supervisory directives as required
    • 3. Professional conduct
    • 4. Loyalty, competence, care
  8. Loyalty
    Work diligently, place employer interests above self-interest, not misappropriate company property (including client lists, models, etc.)
  9. Supervisor Expectations
    Ensuring compliance with ethical, legal, professional, organizational standards
  10. Laws/regulations are not enough (4)
    • 1. May not cover all areas of finance. May be vague, ambiguous
    • 2. Slow to catch up with market innovation
    • 3. Inconsistencies across borders
    • 4. Situations exist where no law exists
  11. CFA Code of Ethics - Guideline for Investment Professionals
    CFA & CIPM candidates must comply with Code & Standards of CFA regardless of what country they are in.
  12. CFA Standards of Professional Conduct (7)
    • 1. Client interests are paramount
    • 2. Diligence, Care, Prudent Judgement
    • 3. Act with independence & objectivity
    • 4. Avoid/disclose conflicts of interest
    • 5. Full/fair disclosure
    • 6. Fair dealing
    • 7. Protect confidential info
  13. Ethics matter because Trust is Essential
    Trust creates liquidity, profitability & efficiency as trust leads to more market participants, more access to equity/debt which increases liquidity and reduces costs.
  14. Framework for Ethical Decision Making (8)
    • 1. Identify issue & duties/obligations
    • 2. Identify conflicts
    • 3. Get facts
    • 4. Identify ethical principals involved
    • 5. Identify factors that could affect judgement
    • 6. Evaluate alternative actions
    • 7. Seek additional guidance
    • 8. Act & review the outcome
  15. In the absence of clear rules, _______ can help guide decision making & behaviors
    Ethics
Author
jlm158
ID
332633
Card Set
CFA Fundamentals 2
Description
CFA Fundamentals 2
Updated