Welcome to the section one-point-two on code of ethics and standards of professional conduct

Welcome to the section one-point-two on code of ethics and standards of professional conduct

In this section, we have three sub-sections that explain the various aspects and concepts related to code of ethics and standards of professional conduct. The subsections are --

a. -- Structure of CFA Institute professional conduct program and the process for the enforcement of the code and standards.

b. -- Six components of the code of ethics and the seven standards of professional conduct.

c. -- Ethical responsibilities required by the code and standards, including the subsections of each standard.

Sub-section one-point-two a: -- Structure of CFA Institute professional conduct program and the process for the enforcement of the code and standards --

All CFA Institute members as well as CFA candidates need to comply with the code of ethics and standards of professional conduct. The CFA Institute rules of procedure for professional conduct and bylaws are the basic structure for the enforcement of the code of ethics and standards of professional conduct.

The CFA Institute Board of Governors and Disciplinary Review Committee have the responsibility for the enforcement of the Code and Standards. The CFA Institute Professional Conduct staff undertakes inquiries related to professional conduct. An inquiry may be based on self-disclosure, complaints, misconduct, reports, etc. The staff may interview, collect document and records. The staff may decide on no sanctions or issue a cautionary letter or discipline the member in case of violations.

If the member rejects sanctions, matter is referred to Disciplinary Review Committee, which gives the final decision on violations and sanctions.

Sub-section one-point-two b: -- Six components of the code of ethics and the seven standards of professional conduct --

The Code of Ethics

CFA Institute members and candidates need to follow the six components of the code of ethics prescribed by CFA Institute, which are --

 Act with integrity, competence, diligence, and 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.

 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 and viability of the global capital markets for the ultimate benefit of society.

 Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

The seven standards of professional conduct prescribed by CFA Institute are --

 Professionalism

 Integrity of Capital Markets

 Duties to Clients

 Duties to Employers

 Investment Analysis, Recommendations and Actions

 Conflicts of Interest

 Responsibilities as a CFA Institute Member or CFA Candidate

Sub-section one-point-two c: -- Ethical responsibilities required by the code and standards --

High ethical standards are very critical to maintain the trust in financial markets and in the investment profession. All members and candidates of CFA Institute have the personal responsibility to uphold the code of ethics and standards. They need to act in the best interest of the clients and in a very fair and transparent manner. CFA Institute members should follow the standards prescribed by CFA Institute in all respects as explained hereunder --

 CFA Institute members should observe professionalism. They should have knowledge of the law and must comply with all applicable laws and rules. They must comply with more strict laws and rules in the event of conflict. Members must maintain independence and objectivity and avoid misrepresentation or misconduct.

 CFA Institute members should preserve integrity of capital markets. They should not act or cause others to act on material nonpublic information that could affect value of an investment. They should not engage in market manipulations that distort prices or artificially inflate trading volume.

 CFA Institute members should properly carry out the duties to clients. Members should act with loyalty, prudence, and care for the benefit of the clients. Members

should have fair dealing with all clients. Members should determine suitability of an investment with respect to investment experience, risk and return objectives, and financial constraints of clients with total portfolio perspective. Members must give a fair, accurate, and complete investment performance information or presentation. Members should ensure preservation of confidentiality of client information unless information concerns illegal activities; or disclosure is required by law or permitted by client.

 CFA Institute members should properly carry out the duties to employers. They should observe loyalty and disclose additional compensation arrangements like gifts and obtain written consent. Members should properly discharge the responsibilities of supervisors and ensure that the subordinates comply with applicable laws and rules.

 CFA Institute members should properly carry out the investment analysis, recommendations, and actions. They should strive for diligence and reasonable basis for investment recommendations, and actions. They must have proper communication with clients and prospective clients about the investment processes, portfolios, limitations and risks, etc. They must use reasonable judgment, distinguish between fact and opinion in the investment analysis, and ensure record retention.

 CFA Institute members should avoid conflicts of interest. Members must make full and fair disclosure in plain language. Members should maintain the priority of transactions of clients and employers. Members should disclose the referral fees to their employer and clients.

 CFA Institute members should understand the responsibilities as a CFA institute member or CFA candidate. Members should not engage in any conduct that compromises the reputation or the integrity of CFA Institute or CFA designation.

They must not misrepresent or exaggerate the implications of CFA Institute membership or CFA designation.