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Study Session 1: Ethical and Professional Standards

Level II Topics by CFAI Study Session

One of my favorite features of the new site is the ability to “tag” topics using one of the CFAI study sessions. For example, if you post a topic on ethics you can select Study Session 1: Ethical and Professional Standards so that your topic will show up in the filter for that study session. This will allow you and other members of AF to quickly access posts for a specific study session. To tag a new topic with a study session, simply choose that study session from the Filed Under categories above the Save button on the new forum topic page.

Ethical obligations of supervisors

Ahmed Jamal, CFA, head of research for Valley Brokers, decided it was time to change his recommendation on D&R Company from buy to sell. He orally announced his decision during the Monday staff meeting and said his written report would be finished and disseminated to Valley’s customers by the middle of next week. As a result of this announcement, Doris Smith, one of Jamal’s subordinates, immediately sold her personal shares in D&R, and Martin Temple told his largest institutional customers of the change the following day.

Making “public”, material nonpublic information

This is accurate but an odd statement;

From the Standards of Practice Handbook states; “if a member or candidate determines that information is material, the member … should make reasonable efforts to achieve public dissemination.” 

Therefore trading for a personal account would be contrary to the Code and Standards, but public dissemination appears fine. Not a surprising conclusion.

Last minute ethics

Schweser had a question about an investment firm that guaranteed a return on a riskless arbitrage trade, which the vignette stated was only possible by them since the firm is the largest in the world and has the lowest transaction costs.

Conflict of Interest

Receiving any benefits that may give the impression of conflict of interest (silting on the board of another company, chairman of a charity,…etc)

Member should disclose ot client

Should also disclose to employer but has to take a written consent?

When does the member have to disclose to employer but  without a written approval

Ethics - performance presentation

Hey guys,

I was reading a practice vignette and couldn’t find an answer as to how often a manager should update performance records on website. The item set seemed to imply not updating after 6 months of underperforming wasn’t frequent enough. I assume quarterly would be adequate?

Ethics - Research Objectivity

If a company is performing an activity which is contrary to the Research Objectivity standard recommendations. Would it be considered a violation?
There are some aspects in the recommendation section which conform with the requirements, and would be difficult to distinguish the two apart.

Ethics question

Catherine Czcibor, CFA, works as a portfolio manager for a local investment counseling firm. She is also a member of her son‟s school committee to help raise funding for a program for gifted children in music. Czcibor discusses an arrangement with her supervisor in which she will donate a certain percentage of her fees from clients referred to her by the school staff and parents. She gets a written approval from her firm.

Beneficial Ownership-going crazy

I’m totally lost in the beneficial ownership section, I will summarize what I have understood and would love to have your feedback, I have also included the standard below for whomever want to read it:

1. These accounts should be executed after clients, in case of having: