Reading 1: Code of Ethics and Standards of Professional Condu class, label, style, center, 2011

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Session 1: Ethical and Professional Standards
Reading 1: Code of Ethics and Standards of Professional Conduct

LOS a: State the six components of the Code of Ethics and the seven Standards of Professional Conduct.

 

 

The first component of the Code of Ethics does NOT explicitly say that a CFA Institute member will act in a certain manner with respect to which of the following groups?

A) Colleagues in the investment profession.

B) The SEC.

C) The public.

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The SEC is not mentioned in the Code of Ethics. Component one mentions duties to the public, clients, prospects, employers, employees, colleagues, and other participants in the global capital markets.

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In accordance with Standard III (A) Loyalty, Prudence and Care, which of the following statements is least accurate? Members and Candidates should:

A) vote all proxies on behalf of clients in a responsible manner.

B) utilize client brokerage to the sole benefit of the client.

C) submit to clients, at least quarterly, itemized statements detailing all of the period’s transactions.

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Because of the time and expense involved in voting a proxy, Members and Candidates are not required to vote every proxy. A cost benefit analysis can be performed to determine if it is necessary to vote a proxy.

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Which of the following is a component of the Code of Ethics?

A) Members shall not knowingly participate or assist in any violation of such laws, rules, or regulations.

B) Members shall use reasonable care and exercise independent professional judgment.

C) Members shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness, or professional competence.

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This is a component of the Code of Ethics. Others pertain to the Standards of Professional Conduct.

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Which of the following is NOT part of the CFA Institute Code of Ethics. Members of CFA Institute will:

A) recommend investments that maximize returns for a given level of risk.

B) use reasonable care and exercise independent professional judgment.

C) strive to maintain and improve their competence and the competence of others in the profession.

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Standard of Professional Conduct III(C), not the Code of Ethics, requires that investments be appropriate and suitable.

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According to the Code of Ethics, the professional judgment of a member should be:

A) guided by the SEC guidelines.

B) dependent on that of his/her colleagues.

C) independent.

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The Code of Ethics states that the CFA Institute member shall “Use reasonable care and exercise independent professional judgment.” None of the other answers resemble anything in the Code.

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According to the Code of Ethics, when practicing in a professional and ethical manner the goal is to:

A) reflect credit on members and the profession.

B) increase membership in CFA Institute.

C) resolve conflicts between clients and employers.

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The Code states that a member shall “Practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their profession.”

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Which of the following is a component of the Code of Ethics? CFA Institute members shall:

A) act for the benefit of their clients and place their clients' interests before their own.

B) disclose to their employer all matters that reasonably could be expected to interfere with their duty to their employer or ability to make unbiased and objective recommendations.

C) strive to maintain and improve their competence and the competence of others in the profession.

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Striving to maintain and improve their competence and the competence of others in the profession is one of the components of the Code of Ethics, whereas the other statements are part of the Standards of Professional Conduct.

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The first component of the Code of Ethics does NOT explicitly say that a CFA Institute member will act with which of the following?

A) Integrity.

B) Competence.

C) Solemnity.

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Component one mentions all of these except solemnity.

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Which of the following is NOT an act explicitly referred to in the Code of Ethics?

A) Using reasonable care when making investment recommendations.

B) Giving free introductory seminars on investing to the public.

C) Improve professional competence.

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Although the Code says a member has obligations to the public, educating the general public for whatever reason is not implied.

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According to the Code of Ethics, which of the following statements is NOT correct? CFA Institute members are required to:

A) use reasonable care and exercise independent professional judgment.

B) maintain and improve their competence and strive to maintain the competence of others in the profession.

C) comply with the CFA Institute Performance Presentation Standards.

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The CFA Institute-PPS are voluntary standards for the industry. Firms are not required to comply with these standards when presenting performance. The other statements are each components of the CFA Institute Code of Ethics.