Reading 3: Ethics in Practice－LOS b, (Part 1) ~ Q1-3

class, investment, industry, banking, conduct

Q1. Harold Klein, CFA, is an expert on ethical conduct in the investment banking industry and has been asked by an association of investment bankers to give a presentation on interpreting codes of ethics and standards of practice such as the CFA Institute Code of Ethics and Standards of Professional Conduct. In his presentation, Klein makes two key points:

1. Sound ethical judgment requires careful and thoughtful application of ethical standards which are precise and exacting in nature

2. An ethical professional must begin the ethical decision making process by determining the applicable code and standards that govern the situation.

Determine whether Klein’s statements are correct or incorrect and state your conclusion.

Statement 1 Statement 2

A) Incorrect Correct

B) Correct Correct

C) Incorrect Incorrect

Q2. Which of the following statements concerning the interpretation and application of the CFA Institute Code of Ethics and Standards of Professional Conduct is FALSE?

A) The Code of Ethics is a concise set of general principles that can be used to address questions as they arise, but as a practical matter, ethical decision making is needed to apply the Code to complicated situations.

B) Ethical reasoning is mathematically precise and the technical terms found in the Code of Standards and Standards of Professional Conduct are clear-cut and unambiguous.

C) Once the relevant sections of the Code of Ethics and Standards of Professional Conduct have been identified, the investment professional must determine if the course of action is consistent with the intent, whether the client would agree the action is the best alternative, and whether the firm’s reputation would be enhanced or compromised.

Q3. Tyler Hanson, CFA was recently hired as a portfolio manager at Newton Management Inc. Hanson is concerned about several ethically questionable situations that have presented themselves over the past few weeks, and has approached the firm’s compliance officer for counsel as to the best course of action to take in light of each situation. The compliance officer has offered several suggestions to assist Hanson in evaluating the situations that he detailed in their meeting. Which of the compliance officer’s following suggestions should Hanson NOT use in interpreting the Code and Standards to determine appropriate action?

A) Determine whether a fully informed client would likely view the chosen action favorably and if not, choose a different course of action.

B) Assess whether the general public would perceive the firm more favorably if the situation were to be objectively reported in the media and if not, choose a different course of action.

C) Assess whether the chosen action would provide an immediate positive economic benefit to the firm and if not, choose a different course of action.