Reading 1: Code of Ethics and Standards of Professional Con div, style, 2010, center

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

LOS a, (Part 1): State the six components of the Code of Ethics.

 

 

 

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 public.

C) The SEC.

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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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Which of the following is NOT part of the CFA Institute Code of Ethics?

A) Contractual provisions.

B) Independent judgment.

C) Competence.

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Contractual provisions are not part of the Code of Ethics.

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According to the CFA Institute Code of Ethics, CFA Institute members shall:

A) act with integrity, competence, diligence, respect, and in an ethical manner when dealing with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.

B) maintain knowledge and comply with all applicable laws, rules and regulations.

C) preserve the confidentiality of information communicated by clients, prospects, or employers concerning investment matters.

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Acting with integrity, competence, diligence, respect, and in an ethical manner when dealing with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets is one of the six components of the Code of Ethics, whereas the other statements are part of the Standards of Professional Conduct.

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All of the following are components of the Code of Ethics EXCEPT:

A) using reasonable care and exercising independent professional judgment.

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

C) demonstrating diligence, independence, and thoroughness when preparing investment reports.

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Demonstrating diligence, independence, and thoroughness when preparing investment reports is found in the Standards of Professional Conduct.

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The Code of Ethics does NOT explicitly say that a CFA Institute member shall do which of the following?

A) Exercise independent professional judgment.

B) Act with integrity.

C) Actively lobby for new laws to protect the public.

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The Code of Ethics says nothing about a CFA Institute member lobbying for new laws. In fact, legal issues are not a part of the Code. The Standards of Professional Conduct say that the member shall obey laws.

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John Elliot, CFA, says that in issues of ethics he always puts the clients first according to the guidelines in the Code of Ethics. In doing so he is:

A) correct.

B) not correct, because his first duty is to the public.

C) not correct, because no such ordering or priority is given in the Code.

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Component one mentions duties to the public, clients, prospects, employers, employees, and fellow members. No ordering of priorities is given.

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

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

B) use reasonable care and exercise independent professional judgment.

C) use particular care in determining applicable fiduciary duty.

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Using reasonable care and exercising independent professional judgment 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 CFA Institute Code of Ethics least likely requires a Member or Candidate to:

A) Strive to maintain and improve the competence of others in the profession.

B) Practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their profession.

C) Understand and comply with all applicable laws, rules, and regulations.

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Understanding and complying with all applicable laws, rules, and regulations is required by Standard I(A) – Knowledge of the Law. The other choices are included in the Code of Ethics.

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According to the Code of Ethics, a member reflects credit on the profession when a member:

A) consults with other members on a regular basis.

B) practices in a professional and ethical manner.

C) places the clients first.

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Component four of the Code says that a member shall “Practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and the profession.” Neither of the other choices are implied by the Code.

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Which of the following is least likely a component of the Code of Ethics? In dealing with the public, clients, prospects, employers, employees, and fellow members, CFA Institute members shall act with:

A) integrity.

B) humility.

C) respect.

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Although acting with humility may be desirable, CFA Institute members are not required to do so. However, they should act in a manner that reflects credit on themselves and their profession.