Notesale: Turn your study into money

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Concepts

Description

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Knowledge of the law : understand and comply with all applicable laws, rules and regulations (must comply with the more strict law, rule and regulation)
Member should :
- Keep up with changes in laws, rules and regulations
- Separate themselves from prohibited activity ; encourage employer to end that activity
- Report violations to governmental autorities is advisable , and required by laws in some countries
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Misrepresentation : Must not knowingly make any misrepresentation relating to investment analysis, actions, etc
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Misconduct : Must not engage in any professional conduct involving dishonesty, fraud, or deceit ; must not commit any act that reflect adversely on their professional reputation,
integrity or competence

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Material non-public information : individuals who possess material non-public information that could affect the value of an investment must not act / cause others to act on the
information
- Members may receive material non-public information when they involve in a certain transactions → Can use those informa on for that transac ons only, unless it becomes public
- Not all information from internet / social media is public information → should confirm via company press / regulatory filings
* Mosaic theory : combine public information vs non-material non-public information → not viola on

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Duties to clients

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Fair dealing : deal fairly and objectively with all clients
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Suitability :
- In advisory relationship
+ Make reasonable inquiry into client's investment experience, risk and return objectives, financial constraints prior to making any investment recommendation / taking investment
action
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In case receive a request from client to
purchase an unsuitable security :
+ Minimal effect on the risk/return profile of the portfolio : follow the firm's policy, and communicate with the client on the reason for unsuitableness
+ Material effect on the risk/return profile of the portfolio : Update the Investment Policy Statement (IPS); or make a separate client-directed account
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Preservations of Confidentiality : must keep client's information confidential, unless (1) the information converns illegal activities; (2) require by law; or (3) permit from client

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Loyalty : must act for the benefit of their employer
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Not cause harm to the employer
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Violation includes:
+ misappropriate of trade secrets
+ Misuse of confidential information
+ Soliciting employer's client prior to leaving
+ Self-dealing
+ Misappropriation of client lists
- Employers records on any device are firm's property
- After leaving an employer, simple knowledge of name of formal client , and experience + knowledge gained while working with former employer are not prohibited from using, except
when there is agreement exist

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Responsibilities of supervisors : ensure anyone under supervision comply with applicable laws, rules, regulations and the Code of Standards
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Diligence and reasonable basis :
- Exercise diligence, independence, thoroughness in investment analysis, recommendation and actions
- Have reasonable, adequate, well-supported basis for any investment analysis, recommendation and actions
- List of factors need to be considered include:
+ Global and national econ conditions
+ Firm's financial result, operating history and cycle stage
+ Fees and historical result of funds
+ Limitations of any quantitative models used
+ Determination whether peer group comparisons for valuation are appropriate
- When using 3rd party research:
+ Review assumptions used
+ Determine the accuracy of the analysis
+ Determine the timeliness of the research
+ Evaluate the objectivity and independence of the recommendation
- If a member does not agree with the independent and objective view of the group, he does not have to decline to be identified with the report
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Record retention : maintain record to support investment analysis, recommendations and actions (minimum 7 years as in the Standard)

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Disclosure of Conflicts : must make full and fair diclosure all matters expected to affect the independence and objectivity, or affect their duties to clients and employer (e
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: actual
ownership of stock that the member recommends or that client hold ; compensation/bonus structure)
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Common conflicts are :
+ ownership of stock that member recommends / client holds
+ member's compensation / bonus structure
- Must give employer enough information to judge the impact of conflict
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Referral fees : must disclose to employer and clients any referrals fees paid for, or received from others for product recommendation

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Conduct as participants in CFA Institute programs : must not engage in any conduct that affect the reputation and integrity of CFA Institute, includes:
member
- Cheat on CFA exam or any exam
- Reveal information about topic tested, content of the exam questions, formulas used/not used in the exam
- Not following rules and policies of CFA program
- Give confidential information on the CFA Program to candidates or public
- Improperly using the title ro further personal and professional goals
- Misrepresent information on the Professional Conduct Statement (PSC) or the CFA Institute Professional Development Program
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There is no partial CFA designition

Concepts
Objectives of Research Objectivity
Standards

Research Objectivity standards

Description
CFA Institute Research Objectivity Standards
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Full, fair, meanigful and specific disclosures to clients of possible and actual conflict of interest
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Support self-regulation by complying with specific, measureable standards to promote objective and independence research
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Research Objectivity policy - a firm must have
- Formal written independence and objectivity of research policy distributed to clients and employees
- Supervisory procedures to make sure employees comply with the policy
- A senior office that confirm annually to clients that firm has complied with the policy
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Reasonable and adequate basis :
- Research reports and investment recommendations : must have reasonable and adequate basis
- An employee / committee must be in charged with reviewing / approving all reports and recommendations
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Research analyst compensation - should be linked directly to the quality of researchs / recommendations, instead of investment banking / corporate finance activities
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Personal investment and trading - firm must have policies and procedures that :
- Address personal trading of covered employees
- Ensure covered employees do not share that info with anyone who could use that info to trade ahead
- Ensure covered employees and immediate family members cannot trade ahead of the client
- Prohibit covered employees and immediate family members to trade against the recommendation, except in extreme financial hardship
- Prohibit covered eomployees and immediate family members to buy/receive share of subject companies / companies in the subject industry prior to IPO
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Compliance and enforcement - Firm must :
- Enforce their policies / procedures
- Assess disciplinary sanctions on employees who violate the policies
- Monitor the effectiveness of the procedures
- Maintain records of any internal audits of the policies
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