Ethics

Brief summary of all issues identified in the application examples

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Nonpublic information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

A: If notified of violations, report to supervisor/compliance dept or seek independent legal opinion If firm does not remedy a violation, dissociate and seek legal advice. This may result in the need to seek other employment. Abide by the more strict rules, especially important in developing markets Be aware of how religious laws and requirements may impact on investment strategies (e.g. Islamic finance) B: Use judgement when accepting travel/accommodation. If modest, ok. Best practice is to pay for all expenses and travel if practical. Cannot promise to provide a favourable recommendation. Recommendations must be solely on a companys quantitative and qualitative fundamentals and must not be impacted by any other potential business the firm wants to do with that client. Nor must opinions be influenced by sales targets or opinions of a boss. Substantial gifts from a related party (i.e. brokerage house) should not be accepted. Gifts from clients must be disclosed to employer but supervisor should monitor in case of favouritism. Be wary of conflicts when attending sponsored events such as conferences and ensure all basic expenses paid for Fees for writing research reports must not be linked to outcome of report or subsequent investment levels Funds must not be promoted to clients on the basis of commission to the advisors. Research should not be limited to historical norms i.e. Should consider that the house market might fall when evaluating MBSs.

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

C: Do not overstate what services a firm can provide. Make it clear if research is issuer paid or independent Unintentional errors must be corrected and clients receiving erroneous material must be informed. Failure to correct known errors is a breach Copying large sections of a research report and presenting it as ones own is plagiarism. It is ok to refer to another report and add own analysis and conclusions. Terms of an investment must not be misrepresented, i.e. Claiming government backing or guarantees if that is not the case or if terms are not made clear. If someone elses model is amended, credit must go to the original source of the model for the innovative thinking. Copying any material verbatim is a breach, even if plain language descriptions of general concepts. If a mainstream media outlet refers to a report, obtain the original report, else refer to both sources 3rd party research can be relied on but do not imply you are the author An asset management firm should be aware of the way structured products based on assets under their management are being marketed as regards risk and should pursue any perceived issues Avoid investments if the risk and return profiles are complex or unclear D: Excessive drinking during the working day is bad for the individual, the employer and the industry Fraud and dishonesty in the workplace breaches this standard Acts of civil disobedience in support of personal beliefs are not considered a breach If internal channels for suspected unethical activity do not satisfy concerns, gather more evidence, and then consider going to the regulators

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

A: Communicating material non-public information, or trading on the basis of such information is a breach (includes overheard info and information discovered socially, even if the subsequent share price movement is adverse). Firms should put in place barriers to prevent flow between e.g. Corporate finance and sales depts. Trading on pre-publication recommendations (printed, TV, online) that move the market is also a breach. Also a breach is a broker placing his own trades before a trade that he knows will move the market. Small-group forum information is not public. If the source is unreliable (speculation from an unlinked professional), the info is not considered material The mosaic theory allows conclusions to be drawn from e.g. discussions with suppliers and retailers about a company B: No artificial company promotion in the guise of independent analysis No false trading to manipulate the stock price (i.e. Trading through a network of accounts to inflate bid prices or generate an illusion of volume) No spreading of rumours to create volatility or price movements Liquidity pumping strategies are a breach unless disclosed (lower commissions on unusually high trade volumes) Do not exaggerate an earnings estimate to fuel a quick gain or force out information from the company Manipulating ratings on structured products for short term gain damages the firm, investors and the capital markets

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

A: Investment managers for pension plans must act in interest of plan, not sponsoring company (e.g. Purchasing co stock to thwart hostile takeover) Client brokerage must benefit clients through best execution or investment decision-making related services but client can direct brokerage providing they provide a written statement. Advisors should not be swayed towards brokers by favourable personal transactions or entertainment. Excessive trading to earn commission-related fees is a breach. If family accounts are regular fee-paying accounts, allocation of shares should be proportionate with all other clients If hired as an expert witness by a law firm, must be impartial Advisors have a duty of loyalty to clients, investment managers must follow IPS of fund, not needs of fund investors B: No early disclosure of pending reports or opinions to selected clients, although greater attention to higher fee clients is ok Orders must be executed on a fair basis across accounts and disclosure of an unfair policy does not make it ok. In oversubscribed IPOs, do not take personal shares If there is a delay between trade and allocation, be systematic across accounts (pro-rata) Pro-rata trade allocation can be amended to satisfy minimum lot requirements

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

C: Assigning high risk investments to a low risk tolerance client likely to be a breach know circumstances and objectives Consider an investment in the context of whole portfolio (covered call). Update IPS if circumstances and risk tolerance change amend asset allocation. Stick to investment mandate e.g. Income v zero div or liquidity v lock in period. If choosing a sub-manager do not base decision on fee levels alone. Do not make decisions for short term remuneration decisions over clients long term objectives. Investment advisors should not be simple sales agents for hedge funds, must consider suitability. D: Do not pick one funds one year return and present as an average expected return. No false claims of GIPS compliance. Any past performance from a previous employer should be disclosed as such. Simulated returns must be clearly signposted as such. Composite returns must be fairly calculated no inclusion/exclusion with purpose of boosting results. E: No divulging of client information to third parties, even if potential donors. Check with supervisor, compliance dept and legal council if a client suspected of wrongdoings and consider resigning as asset manager.

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation E Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

A: No soliciting clients or tendering for new business in competition to employer whilst still employed by old firm. No use of confidential info to contact clients after leaving but using public info is ok. No removal of any physical or electronic records or property without permission, also applies to unpaid interns Initiating an employee-led buyout is ok. A report for an existing firm (even if no written contract) cannot be provided to a new employer without permission Preparations to set up a new firm in employees own time are ok. Need to discuss other compensated assignments if duties are time consuming. Whistleblowing is not a breach, if required following no satisfactory resolution of suspected unethical behaviour. B: Failing to inform an employer of a client bonus arrangement or outside compensation is a breach. If accepting hospitality it should be cleared in advance and disclosed. C: Supervisors need to ensure procedures are in place to prevent trading on inside information and must ensure regular personal account transaction forms are completed. Supervisors must review reports before dissemination or online publication to ensure adequate basis. If responsible for compliance with securities laws, must investigate unusual trading . If responsible for portfolio management, a breach to preside over a lack of compliance procedures and review. Supervisors have a responsibility to review concerns brought up by subordinates. Firms must have sufficient supervision and review in place to pick up on actions that may be a result of conflicts of interest (switch of fund management to a friend).

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation E Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

A: Do not over-stretch firm resources may result in staff rushing reports and estimating key inputs. Do not present best case scenario as base case. A few news articles and wisdom of markets does not constitute reasonable basis. Reports must be updated to include material new information. Members can ask to have name removed from a report if they disagree with group conclusion but no need to dissociate if trust decision-making process. Can rely on 3rd party research if made reasonable and diligent efforts to ensure research is sound. Choice of sub managers, funds or advisors must be based on full analysis, not fee structure or personal contacts. Run models with inputs beyond historical range (securitized subprime investments) . Understand all elements of a quantitative model, including correlations between different elements. Recommending a risky investment that subsequently drops in value is ok if reasonable basis. B: Must provide basis of recommendations, even if complex model. Separate opinion from fact (core samples) Describe risks underlying structured product, giving balanced outlook of possible scenarios If change in investment limits or process reflects significant change, notify existing clients as well as all literature. Can apply to investment style, staff, models, external managers. C: Important to retain IPS, records of client recommendations and basis for recommendations. Keep records of interviews, site visits and other research that counts towards reports Records supporting models remain property of firm, cannot be taken to a new employer, and would have to be recreated to take the model to a new employer.

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation E Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

A: Analysts to disclose in report and to employer any relationship between them/their firm and company/securities they are covering or promoting (board positions, stock holdings, post-IPO agents options, significant family stock ownership, personal friendships, fee deals). Best practice to ask another analyst to cover if family inherits large stock position. Clients to be informed if a change in compensation structure creates a conflict of interest (short/long term objectives) Disclose to clients and employers additional compensation for recommending particular stocks. Involvement as a trustee for a charity may conflict with employer, so must be disclosed to employer if potentially time consuming. If covering investment opportunities in a geographic area, must disclose investment opportunities and look at personal trading rules to determine if ok to buy for own account, even if believe firm would not invest in such securities. B: It is a breach to buy for own account in preference to employers account or to place personal transactions ahead of clients. Clients must be given time to react to reports (7 minutes after broadcast not enough). Portfolio manager must disclose shares bought for husbands account, and allocate hot IPO shares for fund first. However family accounts with normal fee structures should be treated equally, with any beneficial interest disclosed. C: Disclose referral fees, whether paid in services or commissions. Also applies to internal company arrangements. Employer must also be informed of any referral arrangements . Portfolio managers should disclose to clients that they are compensated for selling firm products to clients If permission of all parties granted for referral arrangements, ok. Investment consultant to disclose if receive kickbacks from investment managers they select (local regulators may prohibit this practice.

I Professionalism A Knowledge of the Law B Independence and objectivity C Misrepresentation D Misconduct

II Integrity of Capital Markets A Material Non-public information B Market Manipulation

III Duties to Clients A Loyalty, Prudence and Care B Fair Dealing C Suitability D Performance Presentation E Preservation of confidentiality

IV Duties to Employers A Loyalty B Additional Compensation Arrangements C Responsibilities of Supervisors

V Investment Analysis, recommendations and actions A Diligence and reasonable basis B Communication with clients and prospective clients C Record keeping

VI Conflicts of interest A Disclosure of Conflicts B Priority of Transactions C Referral Fees

VII Responsibilities as a CFA Institute Member or candidate A Conduct as members and Candidates in the CFA program B Reference to CFA Institute, the CFA Designation and the CFA Program

A:No passing on or accepting information on what will appear in examinations. No taking of written information into the exam room. No writing after the exam ends. No revealing of content examined or omitted in examinations, and no discussion of specific question detail Graders cannot reveal any information on the exam material Do not use volunteer position in CFA Institute to benefit oneself or clients Do not infer special advantage to clients of being involved in Institute related committees B: Ok to state passed exams on first attempt, not ok to imply superior ability. Factual statements ok. Can only use CFA designation if keep Prof Conduct Statement up to date and pay fees. Option to apply for retired status and keep designation. CFA logo cannot be incorporated into company logo. Can only be used on business card or letterhead of individual member. Order of designations on business card does not matter.