Reading 2-I: Standards of Professional Conduct & Guidance investment, div, class, security, volunteer

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Session 1: Ethical and Professional Standards
Reading 2-I: Standards of Professional Conduct & Guidance: Professionalism

LOS D.: Misconduct.

 

 

Timothy Hooper, CFA, is a security analyst at an investment firm. In his spare time, Hooper serves as a volunteer for City Pride, which collects clothes for the homeless. Hooper has occasionally given some of the clothes to his friends or sold the clothes instead of returning all of the clothing to City Pride. City Pride discovers what he has been doing and dismisses him. Later, City Pride learns that other volunteer organizations have dismissed Hooper for similar actions. Has Hooper violated Standard I(D) on professional misconduct in the CFA Institute Standards of Professional Conduct?

A) No, because Hooper's conduct is unrelated to his professional activities as a security analyst.

B) No, because Hooper volunteers his services to City Pride.

C) Yes.

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Hooper violated Standard I(D) because he repeatedly engaged in conduct that involves dishonest conduct. This violation occurred despite the fact that his offenses do not relate directly to his professional activities. However, Hooper’s conduct reflects poorly on his professional reputation and integrity.

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A CFA charterholder who comes to work intoxicated is:

A) in violation of Standard IV(A) concerning duties to employer.

B) not in violation of the standards.

C) in violation of Standard I(D) concerning professional misconduct.

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Being intoxicated at work is poor personal behavior. It is a violation of Standard I(D), which covers professional competence and integrity.

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All of the following are violations of Standard I(D), Misconduct, EXCEPT:

A) conviction of a crime involving fraud.

B) any conduct that undermines confidence that the CFA charter represents a level of achievement based on merit and ethical conduct.

C) conviction of a misdemeanor involving civil disobedience in support of one’s personal beliefs.

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The Code and Standards do not focus on personal conduct as long as the conduct does not reflect poorly on one’s professional reputation, integrity, or competence.

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An analyst belongs to a nationally recognized charitable organization, which requires dues for membership. The analyst has worked out a deal under which he provides money management advice in lieu of paying dues. While performing services for the organization, the analyst discovers some useful computer programs that his predecessor developed and left as the property of the organization. The analyst decides to use the computer programs in his consulting business. This action is:

A) a violation of Standard I(D) concerning misconduct.

B) appropriate since the analyst is technically an employee of the organization.

C) a violation of Standard III(B) concerning fair dealing.

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Since the programs are the property of the organization, the analyst can only use them for the organization. It does not matter whether the analyst is an employee or not. Personal use of the programs without permission from the charitable organization is dishonest and prohibited.

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Which of the following does NOT violate Standard I(D), Misconduct? Roland Lawson, a financial analyst:

A) committed perjury in connection with a lawsuit against his firm.

B) drinks excessively during business meetings with clients and returns to work under the influence of alcohol.

C) is arrested for participating in a nonviolent protest.

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Any professional conduct that involves dishonesty, fraud, or deceit is a violation of Standard I(D), Misconduct. One must refrain from activities that reflect poorly on integrity, reputation, trustworthiness, or professional conduct. The focus of the Standard is on professional, not personal, conduct.

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Nancy Hall, a candidate in the CFA program, is an analyst for a mutual fund. As part of her job she makes company visits to interview executives. On a recent trip she stayed with her sister instead of at a hotel. In her expenses Hall included a hotel charge of $100, which was less than the amount allowed by her employer. After receiving a check for her expenses, Hall disclosed to her supervisor that she had stayed with her sister instead of at a hotel. She also returned the $100 to her employer. According to CFA Institute Standards of Professional Conduct, which of the following statements best describes Hall's professional conduct?

A) Hall did not engage in professional misconduct because she eventually disclosed this information and returned the $100 to her employer.

B) Hall did not engage in professional misconduct because she did not meet all of the requirements to use the CFA designation.

C) Hall engaged in professional misconduct.

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Hall engaged in professional misconduct because her act involved dishonesty, fraud, and deceit.

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Hillary Jones, CFA, sometimes promises clients that she will allocate more shares from oversubscribed initial public offerings (IPOs) than she knows she will actually be able to deliver. Her employer has reprimanded her in the past for similar behavior. Which of the following statements is least accurate regarding Jones' behavior?

A) Her actions are a violation of the standard concerning misrepresentation, because she promised something she knew the firm could not deliver.

B) Her actions are a violation of the Standards only if prosecution results in a felony conviction.

C) Her actions are a violation of the standard concerning professional misconduct because she deceived her clients.

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Jones violated Standard I(C) Misrepresentation by promising clients she would allocate more shares than she could deliver. Her actions also violated Standard I(D) Misconduct pertaining to acts of dishonesty, fraud, or deceit which reflects adversely on a member's professional reputation, integrity, or competence. She also violated the Code of Ethics which states that members and candidates must act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, and prospective clients. The specific punishment for the actions is not relevant.

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An investment advisor takes a trip for which his firm will pay the expenses. Upon his return he alters some of the numbers on restaurant receipts to inflate the expenses by $64. Is this a violation of Standard I(D)?

A) No, if such a crime carries less than a one-year prison term.

B) Yes, because it reflects adversely on the charterholder’s professional reputation.

C) Yes, because the amount involved is over $50.

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Professional conduct involving dishonesty, fraud, or deceit is a direct violation of Standard I(D), Misconduct.