Tiêu đề LM02 Guidance for Standards I-VII IFT Notes.pdf ✅

LM02 Guidance for Standards I-VII 2023 Level II Notes © IFT. All rights reserved 1 LM02 Guidance for Standards I-VII Introduction ........................................................................................................................................................... 3 Standard I: Professionalism ............................................................................................................................. 3 Standard 1 (A) Knowledge of the Law..................................................................................................... 3 Standard 1 (B) Independence and Objectivity ..................................................................................... 4 Standard 1 (C) Misrepresentation ............................................................................................................ 6 Standard 1 (D) Misconduct .......................................................................................................................... 8 Standard II: Integrity of Capital Markets .................................................................................................... 9 Standard II (A) Material Nonpublic Information ................................................................................ 9 Standard II (B) Market Manipulation ...................................................................................................11 Standard III: Duties to Clients ......................................................................................................................11 Standard III (A) Loyalty, Prudence, and Care ....................................................................................11 Standard III (B) Fair Dealing ....................................................................................................................13 Standard III (C) Suitability ........................................................................................................................14 Standard III (D) Performance Presentation .......................................................................................16 Standard III (E) Preservation of Confidentiality ..............................................................................17 Standard IV: Duties to Employers ..............................................................................................................17 Standard IV (A) Loyalty ..............................................................................................................................17 Standard IV (B) Additional Compensation Arrangements ...........................................................19 Standard IV (C) Responsibilities of Supervisors ..............................................................................20 Standard V: Investment Analysis, Recommendations, and Actions ..............................................22 Standard V (A) Diligence and Reasonable Basis ...............................................................................22 Standard V (B) Communication with Clients and Prospective Clients ....................................23 Standard V (C) Record Retention ...........................................................................................................24 Standard VI: Conflicts of Interest ................................................................................................................25 Standard VI (A) Disclosure of Conflicts ................................................................................................25 Standard VI (B) Priority of Transactions .............................................................................................27 Standard VI (C) Referral Fees ..................................................................................................................29 Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate ...........................30 Standard VII (A) Conduct as Participants in CFA Institute Programs ......................................30 Standard VII (B) Reference to CFA Institute, CFA Designation, and CFA Program .............31 Summary ..............................................................................................................................................................32 This document should be read in conjunction with the corresponding reading in the 2023 Level II CFA® Program curriculum. Some of the graphs, charts, tables, examples, and figures are copyright

LM02 Guidance for Standards I-VII 2023 Level II Notes © IFT. All rights reserved 3 Introduction This is a long reading, which provides guidance and recommended compliance procedures for each standard. Several examples are also given on how the standards should be applied. IFT Notes focus on the guidance and recommended compliance procedures. Read the examples (applications of the standards) from the curriculum. Standard I: Professionalism Standard 1 (A) Knowledge of the Law Members and Candidates must understand and comply with all applicable laws, rules, and regulations of any government, regulatory organization, licensing agency, or professional association governing their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations. Interpretation: You, as a member or candidate, must be aware of all laws where you conduct business. Stating that you are not aware of the laws and hence a violation occurred, will not be acceptable. Guidance:  Relationship between the Code and Standards and Applicable Law: Assume you are an investment adviser based in Malaysia. You are a Malaysian citizen and your clients are also based in Malaysia. Here the Malaysian law is the ‘applicable law’. As a CFA candidate, the Code and Standards must also be considered. Let’s assume that Malaysian laws prohibit participation of investment advisers in IPOs but the Code and Standards allow participation under specified circumstances, then you have to follow the stricter law – the Malaysian law in this case. If there is no applicable law or regulation, then Members and Candidates must follow the Code and Standards.  Investment products and applicable laws: Follow the stricter law.  Participation in or association with violations by others: You are responsible for violations in which you knowingly participate or assist. (Knowingly is the key word here.) Assume you are part of a group and you have reasonable grounds to believe a violation is taking place. Under such circumstances: o First, make an attempt to stop the behavior by bringing it to the notice of your supervisor/compliance department. o Seek the advice of independent legal counsel if the compliance department was not helpful. o If this doesn’t work, dissociate yourself with that activity. Dissociation varies based on your role in the organization; it could be:
LM02 Guidance for Standards I-VII 2023 Level II Notes © IFT. All rights reserved 4  Removing your name from the investment reports and recommendations.  Asking for a different assignment.  Refusing to accept a new client or continuing to advise the current client. o In extreme cases, leave the organization.  Not taking an action after reporting a violation (and continuing association with the illegal activity), can be considered as participating in the illegal or unethical conduct.  If you are not sure that a violation is taking place, then the appropriate action would be to seek the advice of legal/compliance counsel.  CFA Institute does not compel you to report violations to the government or regulatory organization unless required by law. Recommended procedures for compliance:  Stay informed: Have a procedure or regular training to keep employees informed of the changes in applicable laws, rules, regulations etc.  Review procedures: Periodically review firm’s written compliance procedures to ensure it conforms to the applicable law.  Maintain current files: Latest copies of applicable rules and regulations should be available for reference.  Legal counsel: If in doubt on how to respond to a possible violation, seek the advice of legal/compliance personnel.  Dissociation: Document the violation if you are dissociating from an illegal activity; urge the firm to take steps to cease the activity, and resign in extreme cases.  Advise/encourage your firm to: o Develop and/or adopt a code of ethics. o Provide information on applicable laws: make all the information regarding laws and rules available in a central location. o Establish procedures for reporting violations: make it easy to report violations. Standard 1 (B) Independence and Objectivity 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. Interpretation: Maintain independence and objectivity. Do not compromise your independence and objectivity under any circumstance as it can hurt not just your firm, but the whole industry. For instance, assume you are writing a research report and the firm you are covering gives you an expensive gift. Accepting the gift may shroud your judgment to be impartial and give an objective report.