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CFA Ethics Notes

CODE OF ETHICS

REQUIREMENT:

Promote the integrity of and uphold rules governing capital markets.

Act in interest of clients. BUT CLIENTS CAN BE UNETHICAL

Does not require encouraging others to pursue CFA designation but to improve professional
competence.

III

A Loyalty, Prudence, Care

PROXY VOTING
Cost benefit analysis is not a violation, changes to policies of proxy voting must be disclosed; voting with
management on majority of issues is a VIOLATION.

B Fair Dealing

SCHLEIF v Only email INVESTMENT BANKING CLIENTS

Standard I(B) Independence and Objectivity

KUMAR v Mining Private JET


Best practice dictates only to accept compensation related to OBJECTIVES (research report data
gathering).

Standard V(C)

Pavlov v Research Report Previous Company


Not violation of IV(A) Loyalty, but V(C) record retention due to not having UNDERLYING PERFORMANCE
DATA to support HISTORICAL RETURN CALCULATIONS
Standard IV: DUTIES TO EMPLOYERS

Note: Additional compensation arrangements is under Duties to employers

(B) Priority of Transactions

Avila v Micro Cap HEDGE FUND


Client transactions ALWAYS takes priority, then employer then personal. Micro-cap can be thinly traded
and easily influenced by changes in volume activity.

(C) Responsibilities of Supervisors

SENECA v Violating Sales Demonstration


Seneca not as supervisor when violating. Supervisor is violated when supervising.

Standard V Investment Actions,

(A) Diligence and Reasonable Basis

Bradovic v Unethical Company Employer

NOT ONLY DISSOCIATE, but QUIT. Firm has total disregard for CFA standards, possibility of continuous
misconduct.

Standard VI DISCLOSURE OF CONFLICTS

(A) Conflicts of Interest

SAAR v Disclosure of conflicts LOAN to Employee


Asset Managers supporting corfin deals must disclose, management fees loss leaders for brokerage
disclose (SOLD AT LOSS TO ATTRACT CUSTOMERS).

(B) Priority of Transactions

(C) Referral Fees

Kawasaki v Referral Fees


Referral fees requires disclosure even without cash changing hands, the arrangement provides for a quid
pro quo referral of clients.

VII

(B) Reference to CFA Institute, Designation, and Program


Garcia v CFA holder implication
Cannot write as such implying partial designation. Or cite expected completion date. Final award of
charter subject to meeting of all requirements and approval by Board of Governors.

GUPTA v FIRST FAITHFUL CHURCH

Restrictions are okay. Can accept client. Agree to manage account

GIPS Standards

Section: Introduction

Implementing Global Standards


Require local sponsoring organization

Section 0
Even when organizational structure changes, historical composite cannot be changed. (Avoid
manipulation)