1A: knowledge of the law

what is the knowledge of the law standard?

• must understand and compy with all applicable laws, rules, regulations of any gov, regulatory org, licesning agency, or professional assocaiton

• must comply with more strict law

• must not knowingly participate or assist in and disclose any violation

what is the relationship between the code and standards and applicable law

• applicable law: law that governs the member’s specific conduct (i.e. minimum threshold)

• always follow the stricter of applicable law or Code and Standards

what guidance is given around participation / association with violations?

• you are responsible for violations you knowingly participate in or assist

• standard applied when you know or should know your conduct may contribute to a violation

• must dissociate if you have reasonable grounds to believe client/employer activity is illegal or unethical

what are the steps to dissociate?

1. attempt to stop the behaviour - raise with supervisor/compliance

2. step away and dissociate from activity

3. remove name from reports, request reassignment, refuse new/current client

4. leave employment

What happens if a member does nothing and continues associating with violators?

inaction + continued association may be construed as participation or assistance

what is the guidance around reporting violations?

• not compelled unless required by law

• strongly encourages reporting

• not reporting is less serious than failing to dissociate

• consult legal/compliance advisors before reporting externally

what is the guidance around investment products and applicable laws?

• be aware of laws in country of origination and country of sale

• make reasonable efforts to confirm distributing firms also compy with local laws

• conduct due diligence on cross border transactions

• seek guidance from compliance, legal, or external counsel when jurisdiction is unclear

what are the recommended procedures for members and candidates?

1. stay informed

• establish process for regular updates on changes to laws

• eg. compliance memorandums, education programs

2. review procedures

• regularly review firm’s written compliance procedures

• ensure procedures reflect current law and give clear guidance on permissable conduct

3. maintain current files

• keep readily accessible up to date copies of applicable statues/rules, and important cases

what should be done for distribution area laws?

make reasonable efforts to understand applicable laws (country and regional) where investment products are developed and dsitributed

when to seek legal counsel

• when uncertain about appropriate action

• if fellow employee may be comitting a violation

what recommendation is given around dissociation?

• document violation

• urge firm to persuade perpetrator to stop

• if necessary, resign

what recommendations are given to firms

1. develop a code of ethics

• ethical culture starts at the top

• helps to resolve ethical dilemmas and reduces need for whistleblowing

2. provide information on applicable laws

• distibute or centrally post important legal information

• goc websites, law firm newsletters, association publications

3. establish violation reporting procedures

• written protocols