2023_CFA_1级_Ethics_道德

2023, CFA, 1级, Ethics, 道德，如Global Investment Performance Standards (GIPS)： only firm managing assets can claim firm-wide and full compliance voluntary follow local law but disclose the conflict

Ethics

Professionalism

Knowledge of the law

know

not expert

comply with law directly governing

strict

law or CFA standards

identify

confirm

dissociate

report

supervisor -> compliance -> dissociate -> resign

suspect

consult

cannot be absolved from requirements to compliance

cultural and religious laws

use of social media

comply with new guidance and regulation governing

Independence and objectivity

Gift

Best practice

reject

from subject company (to research)

modest and normal is OK

from client

not disclosed -> violate 1B, 4B

disclosed but not agree -> violate 4B, not violate 1B

Relationships

buy-side clients

portfolio manager to sell side analyst

fund manager relationship

hiring and retaining outside managers

I-bank

i-bank to research anlyst

performance measurement and attribution

stray from mandate

alter construction of composite

public companies

favorable report

credit rating agency opinion

influence during the manager selection

2 sides bribery

Issuer-paid research

flat fee only

no bonus

travel funding

self-pay

modestly arranged travel

Mispresentation

not promise, unless guaranted

omissions

expected result <> fact

prevent cherry picking

performance reporting

if benchmark exist, align with investment style

Plagiarism

3rd party information

must disclose

typographical error

ok but need to correct

learn from media

1. verify; 2. quote

Misconduct

lying, cheating, stealing

negatively affects ability to perform professional activities

personal bankruptcy

violate if due to fraudulent or deceitful business conduct

intoxicated after lunch

violate

environmental activist

ok

Integrity of capital markets

Material nonpublic information

MNI?

reliable source

clear impact

non-public

selective disclosure

Mosaic theory

material public and nonmaterial nonpublic

using industry experts

not use, not disclose

Market manipulation

info-based

dissemination of false or misleading info

transaction-based

affect prices or volume

not voilate

increase liquidity

trading strategies

trade for tax purposes

Duty to clients

Loyalty, prudence and care

identify client

beneficiary

mandate

soft dollar

seek best price/execution

directly benefit investment

proxy voting policies

cost-benefit analysis

disclose proxy voting policies

undertanding

fiduciary duty

overhead expense -> voilate

Fair dealing

fairly <> equally

trade

pro-rata on order size, not account size

analyst's recommendation

all clients same time

material changes communicated to all clients

clients not knowing changes shall be advised

Suitability

process: know clients -> write IPS -> follow IPS

update IPS at least annually and prior to material changes

diversification

portfolio based but not asset based

manage to index or mandate

consistent with mandate

address unsolicited trade requests

unsolicated trade: not aligned with IPS, instructed by client

discuss concern first

covered call options in equity portfolio -> not voilate, hedge risk

Performance presentation

not misrepresent past performance

not state or imply to obtain past achievement

include terminated portfolio

weighted rate of return

not single performance

make detailed information available

apply GIPS standards

recommended, not must

if stated but not follow -> voilate

full disclosure

can cover simulation, but must disclose

modify performance attribution methodology without proper notification ->voilate

if change module, need to disclose report including reason and results

Preservation of confidentiality

keep confidential

exception

illegal acticities

required by law

client permit disclosure

if law requires confidentiality, even if illegal, shall not disclose

continue to maintain confidentiality even after relationship ended

social media

ok to open new group page on existing platform

cannot communicate personal or confidential information

Duty to employers

Loyalty

on duty

independent practice

no competitive business

ok for non-competitive business after work

open company

can register after work

if competitive, cannot start business before resignation

leaving an employer

violation before leaving

misappropriation of trade secrets

misappropriation of client lists

memorize client list is not permitted

misuse of confidential information

solicite employer's client prior to cessation of employment

violation after leaving

violation of non-compete contract

can only take skills and experience

knowledge of names and existence of clients s not confidential

firm records or research shall be erased or returned

use of social media

place employer's interests first

part time shall also follow

whistleblowing -> violate

Additional compensation arrangements

disclose and get written consent

Responsibility of supervisors

prevent

establish P&P

implement education and training

establish incentives, mometary or otherwise, to reward ethical behavior

find violation

ensure violation will not be repeated

can delegate, but not relieve supervisory responsibility

shall establish procedures to prevent unauthorized dissemination through social media networks

Investment

Diligence and reasonable basis

use secondary or third-party research

determine whether it is sound

cannot deliver as own

use quantitatively oriented research

not required to become experts

must understand assumptions and limitations

make reasonable efforts to test output

develop quantitatively oriented techniques

testing and result analysis before distribution

consider source and time horizon of data used

group research

consensus opinion has reasonable and adequate basis

can sign

always recommend "hot" means no reasonable basis

selection of external adviser or subadviser shall be based on complete review

not guarantee no down-side risk

Communication with clients

disclose format and principles of investment processes

notify additional information are available upon request

promptly disclose material changes

distinguish between fact and opinion

identify risk and limitation of analysis

investment liquidity and capacity

disclose material error

shall educate clients

Record retention

records in hard copy or electronic form

if no regulatory guidance, 7 years required by CFA

records are property of the firm

Conflicts of interest

Disclosure of conflicts

full and fair disclosure

can put conflict of interest into restricted list

Example

sit on board of directors of subject company's subsidiaries

subject company is shareholder

wife inherits subject company's stock

compensation

not require to disclose personal/retirement investments in large diversified mutual funds

Priority of transaction

client -> employer -> individual

allow enough time for clients to respond

Referral fees

inform employer, clients of benefits for referrals

Responsibility as members

Conduct as members and candidates

Reference to CFA institute designation

pass level III but not receive charter cannot use CFA designation

Global Investment Performance Standards (GIPS)

Who

only firm managing assets can claim

firm-wide and full compliance

voluntary

follow local law but disclose the conflict

Verification

independent 3rd party to perform verification

verification cannot based on single composite

verification does not ensure accuracy

Composites

portfolios of similar investment strategy, objective or mandate

actual, fee-payment, discretionary portfolios must be included in at least one composite

non-fee-paying discretionary portfolio may be included

non-discretionary portfolios must not be included

total firm asset must aggregate fair value

Fundamentals of compliance

the firm

include all geographical

same brand name

discretion

firm's ability to implement its investment strategies

client-imposed is nondiscretionary