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Study Session 2: Ethical and Professional Standards: Application

Confidentiality Laws Vs Duties of a member/candidate in the CFAI PCP

Hello everyone. I’m just wondering, if the law does not allow a member or candidate to divulge client information, would it be a violation of the standard III(E) to reveal the information if CFAI PCP requests it? What’s confusing me is a statement in the curriculum that says ” If permissible by law…” Does it mean that you cannot reveal information to the CFAI PCP if  its first allowed under the applicable law?  Or can you reveal info to the CFAI PCP even if the law doesn’t allow it?

Ethics - Duties to Employer regarding independence practice

Example 9 of the the SchweserNotes (pg. 47)

“A member is a full-time employee of an investment management firm and wants to accept a paid position as town mayor without asking his employer’s permission. “

The answer says Since the mayor position does not conflict with his employer’s business interest, there is no violation.

I am confused here cuz I thought the guidance require a notification and employer’s consent. (pg. 43 of the SchweserNotes), can someone explain here? THANKSSSS!

Agent vs. Employee - ethics

Do all the standards for employees also apply for agents? Let’s say you’re on an agent agreement with the firm, and you develop a model to analyze what stocks to pitch to your clients, is that model property of the company? Also, is your client list the company property?

Insider trading and mosaic theory

Let’s say you doing research into a company (combination of interviews with employees and research from public info). The interviews have generated non-material, non-public info, and your cumulative research points to a strong buy. 

Nothing wrong here, but let’s say as you walk out, the CEO gives you a piece of material non-public info…

Can you still buy their stock?

insider trading

if management of a public company places large amount of sell orders one second after a material non public information is published by media (e.g. company is going downhill), is that a violation?

Quiet periods

Can I get a thumb-up/down for these four in relation to quiet periods?

1) Prior to reports being issued
1a) quiet period is 5 days AFTER (R.O.S)

2) Prior to an IPO
2a) 30 days prior, and 10 days after

3) Prior to a new recommendation 
3a) 30 days prior, and 5 days after

4) Secondary offering 
4a) 10 days prior/after

Analyst conference call- material nonpublic information?

1.Is significant information about earnings guidance given out during analyst conference calls material “non-public” information.

If that is so, then aren’t CFA charterholders going to be at a distinct disadvantage in the marketplace, since all the other analysts are likely to trade based on the information they receive on the call, but the CFA charterholders can’t because of their Code of Ethics?

And, if it is considered material non-public information, why do the regulators allow it?

Different fee structure for different clients? A violation?

A and B are both clients of my firm, under the same investment strategy

If I charge Mr. A a management fee of 2% and 20% of profits.


I charge Mr. B a management fee of 2% and 20% of profits in excess of the S&P 500 return,

it can clearly be seen that the two fee structures are different.

Am I in violation of the Code of Ethics / Standards?

Discrepancy in Ethics EOC quesitons

I’m trying to find the difference between these two examples but I don’t see one. Can someone please explain the difference in the example used in quesiton 6 below. The questions are regarding Standard VI(B) Priority of Transactions.