Title 11.2 Code Of Ethics And Standards Of Professional Conduct.pdf ✅

1. According to Standard IV Duty to Employers, all members and candidates must: A. judge the suitability of investments on a total portfolio approach.  B. not accept gifts that create conflicts of interest without written consent. C. not engage in conduct that compromises the reputation of the CFA Institute. Explanation "Members and Candidates must not accept gifts, benefits, compensation, or consideration that competes with or might reasonably be expected to create a conflict of interest with their employer's interest unless they obtain written consent from all parties involved." Standard IV focuses on the duty to employers. Under Standard IV(B), members and candidates must not accept gifts that may create a conflict of interest with their employer unless all parties involved give written consent. Here, all the answer choices are valid constraints of the Standards, but only one is associated with Standard IV. This is a way of testing knowledge of the Standards themselves. Although most exam questions will address applications of the Standards, it is possible that there will be a question like this on the exam. (Choice A) Judging the suitability of an investment using the total portfolio approach is an application of Standard III(C) Suitability, not Standard IV Duty to Employers. Standard III is about a member's or candidate's duty to clients. (Choice C) Standard VII(A) Conduct as Participants in CFA Institute Programs , not Standard IV Duty to Employers, requires members and candidates to act in a manner that does not compromise the reputation of the CFA Institute. Things to remember: One aspect of Standard IV that relates to the duty to employers is accepting gifts. Under this Standard, members and candidates must not accept gifts that may create a conflict of interest with their employer unless all parties involved give written consent. Explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard LOS Copyright © UWorld. Copyright CFA Institute. All rights reserved.
2. Which of the following is one of the six elements of the CFA Institute's Code of Ethics? Members and candidates must: A. judge the suitability of investments in the context of the client's total portfolio.  B. promote the integrity of the global capital markets for the ultimate benefit of society. C. avoid misrepresentations relating to analysis, recommendations, actions, or other professional activities. Explanation Code of Ethics Standards of Professional Conduct Aspirational Overarching expected behavior Conceptual Behavioral Ethical business practices Actionable CFA Charter holders and candidates are obligated to abide by and advocate for the Code of Ethics (ie, the Code) and the Standards of Professional Conduct (ie, the Standards), which provide guidance for appropriate ethical behavior. The Code includes general principles to which members and candidates must adhere. In contrast, the Standards address more specific applications of those principles that must be followed. To identify elements of the Code and the Standards, determine whether the task in question is actionable or is more conceptual. "Promoting... integrity and viability...for the ultimate benefit of society" is one of the six principles of ethical behaviors in the Code. Judging client suitability and avoiding misrepresentation are practical applications of the Standards (Choices A and C). Things to remember: The Code of Ethics and the Standards of Professional Conduct provide guidance in identifying appropriate ethical behavior. The Code includes general principles and the Standards contain more specific applications. Identify the six components of the Code of Ethics and the seven Standards of Professional Conduct LOS Copyright © UWorld. Copyright CFA Institute. All rights reserved.
3. The CFA Institute's Professional Conduct staff (PCS) finds that Simon Perret, CFA, has violated the Standards. Perret rejects the PCS's proposed sanctions. Which of the following is most likely to occur? A. The PCS revokes Perret's charter. B. The PCS issues Perret a cautionary letter.  C. The Disciplinary Review Committee reviews the PCS's investigative report. Explanation The CFA Institute Professional Conduct Program is a framework for handling inquiries about members' and candidates' professional conduct. The Professional Conduct staff (PCS) initiates an inquiry, which is based on an external complaint or internal investigations. The PCS may question the accused member or anyone else associated with the inquiry. The PCS records evidence relevant to the investigation, prepares a report, and determines if a violation occurred. If the PCS believes that a violation occurred and the member accepts this finding, then the PCS will either issue a cautionary letter or proceed with disciplinary action. If the accused rejects the finding, then a panel of the Disciplinary Review Committee (DRC) becomes involved. The panel reviews the PCS's report and further investigates the matter. The DRC determines whether a violation occurred and sets the final disciplinary action. (Choices A and B) The PCS imposes sanctions only when it believes a violation transpired and the member or candidate accepts the PCS's findings. Things to remember: The Professional Conduct staff (PCS) conducts inquiries and determines if a violation occurred. If the accused member accepts the finding that a violation has occurred and the proposed sanction by the PCS, then the PCS sets the penalty. If the member rejects the PCS's decision, then the Discipline Review Committee further investigates the matter, determines if the violation occurred, and sets the final penalty. Describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards LOS Copyright © UWorld. Copyright CFA Institute. All rights reserved.
4. Based on Standard I Professionalism, Members and Candidates must: A. have a duty of loyalty to their clients.  B. maintain independence and objectivity. C. not compromise the reputation or the integrity of CFA Institute. Explanation "Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. Members and Candidates must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another's independence and objectivity." Standard I of the Standards of Professional Conduct addresses the professionalism of Members and Candidates. Standard I(B) Independence and Objectivity specifically states: "Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities...." Standard I(B) specifically focuses on Members and Candidates achieving and maintaining independence and objectivity so that their actions and advice to clients are unaffected by conflicts of interest. The Standard applies to situations wherein entities or individuals may seek to influence the decision-making process to the detriment of clients. It does not apply to gifts from the clients themselves. In this question, all answer choices are directly from the Standards but only one is associated with Standard I. (Choice A) Standard III(A) Loyalty, Prudence, and Care specifically addresses the duty of loyalty that Members and Candidates have toward their clients. (Choice C) Standard VII(A) Conduct as Participants in CFA Institute Programs requires Members and Candidates to act in a manner that does not compromise the reputation or the integrity of CFA Institute. Things to remember: Standard I(B) Independence and Objectivity focuses on Members and Candidates achieving and maintaining independence and objectivity so that their actions and advice to clients are unaffected by conflicts of interest. Explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard LOS Copyright © UWorld. Copyright CFA Institute. All rights reserved.