Ethical and Professional Standards

Reading 3. Guidance for Standards I-VII

Learning Outcome Statements

a. demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity;

b. distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards;

c. recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct.

CFA Curriculum, 2020, Volume 1

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Subject 4. Standard I (D) Misconduct

I. PROFESSIONALISM

D. Misconduct.

Members and Candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit, or commit any act that reflects adversely on their professional reputations, integrity, or competence.

Members and candidates shall not compromise the integrity of the CFA designation, or the integrity or validity of the CFA examinations.

Standard I (A) states the obligation to comply with all applicable laws and regulations. This standard addresses personal behavior that will reflect poorly on the profession as a whole. Any act that involves lying, cheating, stealing, or other dishonest conduct, if the offence reflects adversely on a member or candidate's professional (not personal) activities, would violate the standard.

Procedures for compliance

Members and candidates should encourage their employers to:

  • Adopt a Code of Ethics to which every employee must subscribe. Make clear that any personal behavior that reflects poorly on the individual involved, the institution as a whole, or the investment industry will not be tolerated.
  • Disseminate to all employees a list of potential violations and associated disciplinary sanctions, up to and including dismissal from the firm.
  • Conduct background checks on potential employees to ensure that they are of good character and not ineligible to work in the investment industry because of past infractions of the law.

Example 1

An investment advisor executes excessive trading volume to generate fees. He tells clients that the high level of trading in their discretionary accounts is needed to maintain proper diversification. If this statement is misrepresentative, the advisor is clearly engaging in professional misconduct.

Example 2

A portfolio manager has three martinis at lunch and returns to the office to resume his regular duties. If the manager's judgment is impaired and he is engaging in investment decision-making activities, he is in violation of this standard.

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User Contributed Comments 25

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thekapila

wht about vodka!!! )

mirfanrana

bad habbit mate

epizi

means CFA is part of living!!

augis

As long as you disclose which alcohol company helped you with a specific investment decision, you shouldn't be in violation of standards.

mountaingoat

got milk?

rethan

Augis...haha...thats funny!

Aitchisonian

as sober as a judge...
doesn't sound much fun though ^ ^

dah62

As long as they're shaken, not stirred....

gnacinka

and each company should prepeare a list of drinks forbiden... it belongs to the compliance officer's duties

hyperinflation

Legalize marijuana.

bundy

Hey if your not intoxicated its ok...personally 6 is ok for me Ha ha ha

kahh

What about making investment decisions when stoned?Does the CFA institute think about it or its just OK. Coz in Kenya 90% of my investment manager buddies smoke bud everyday of the week

Raok

what about watching porn while you are making investment decisions?

thekobe

hahaha come on guys youre killing me!! haha

gulfa99

dont speak to your girlfreinds at work...distration will lead to wrong judgement

Jamberto

gulfa99, that is a fact...

tsmith0440

Silly question, but does this mean that if you have a glass of wine and are not intoxicated. You are not in violation? I would assume to play it safe on the test we should assume any consumption of alcohol is prohibited, but I could see a question coming like "the portfolio manager enjoyed one glass of wine at a luncheon and proceeded to go back to work where he made a decision to purchase XYZ corp after careful consideration." I would guess the appropriate answer to such a question is that he would be in violation?

mrpman

he would not be in violation-he is not intoxicated and is able to PERFORM HIS DUTIES REGARDING INVESTMENT MAKING DECISIONS appropriately... or at least thats what i would go with on the exam

Sam123456

What if you're stoned, drunk and watching porn?

vsimco

Don't Drink and Invest with other people's money.

Stacerz02

How do you print study notes from mobile device? I print from browser and pages come up blank like it's blocked. Mind you I paid for a subscription. Mist I be logged in on a computer?

gerdvar

Ali G made it clear "not to do business if you be high", he sold his car for some chicken mcnuggets

Inaganti6

This is hilarious. In the real world there are a couple CFA Charterholders out there who have worked for some of the most crooked people on earth. Commodity trading firms come to my mind.

khalifa92

lol are they implying its okey to drink and go work if ur not going to practice any decision making activities xD?

Sagarsan88

As long as the Martini bill is under 100$, and you pay transportation to reach to office and disclose to your superior about the martinis Flavours. You should be fine. Remember disclosure is very important. Set the BAR high!