Code of Ethics and Standards of Conduct

For the exam with the Swedishprofessor

What does the 1st code of ethics (Professionalism) consist of?

knowledge of law, independence and objectivity, misinterpretation, misconduct and competence

What does the 2nd code of ethics (Integrity of Capital Market) consist of?

market nonpublic information and market manipulation

What does the 3rd code of ethics (Duties to Clients) consist of?

loyalty, prudenace and care, fair dealing, sustainability and suitability

What does the 4th code of ethics (Duties to Employers) consist of?

loyalty, additional compensation arrangements, and the responsibilities of supervisors

What does the 5th code of ethics (Investment Analysis, Recommendations and Actions) consist of?

diligence and reasonable basis, communication with clients and prospective clients, and record retention

What does the 6th code of ethics (Conflicts of Interest) consist of?

avoid or disclose conflicts, priority of transactions, and referral fees

What does the 7th code of ethics (Responsibilities as a CFA Institute Member or CFA Candidate) consist of?

conduct as participants in CFA Institute Programs, and reference to CFA Institute, the CFA designation, and the CFA Program

I (A). KNOWLEGDE OF LAW

Members and Candidates must understand and follow all relevant laws, rules, and regulations, including the CFA Institute Code and Standards. Where there is a conflict, the stricter rule must be followed. They must not knowingly be involved in or support any breach, and must distance themselves from any such misconduct.

What can be interpreted as breaking the I (A). KNOWLEGDE OF LAW?

• A portfolio manager ignores newly implemented AML (anti-money laundering) regulations in a foreign country to avoid extra compliance paperwork.

• An advisor continues to use insider trading tips despite knowing they are illegal in the jurisdiction where trades occur.

• A research analyst follows outdated local laws but disregards stricter CFA Institute standards regarding material nonpublic information.

I (B). INDEPENDENCE AND OBJECTIVITY

Members and Candidates must exercise care and judgement to maintain independence and objectivity. They must not give, seek, or accept any gift or benefit that could reasonably compromise this.

What can be interpreted as breaking the I (B). INDEPENDENCE AND OBJECTIVITY?

• A fund analyst gives a favourable rating to a company after receiving free tickets to a luxury corporate retreat.

• A consultant accepts a vacation package from a pension fund in return for recommending its plan to clients.

• An investment banker overstates a company's valuation due to pressure from the underwriting team.

I (C). MISREPRESENTATION

Members and Candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions or other professional activities.

What can be interpreted as breaking the I (C). MISREPRESENTATION?

• A candidate exaggerates his role in managing a billion-dollar fund on his resume.

• An advisor claims a back-tested strategy has actual performance results.

• A financial firm promotes a product as “risk-free” even though it's linked to volatile market conditions.

I (D). MISCOUNDUCT

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 reputation, integrity or competence.

What can be interpreted as breaking the I (D). MISCOUNDUCT?

• An analyst falsifies expense reports to get reimbursed for personal meals.

• A manager routinely arrives to work intoxicated, impairing judgment.

• A team leader encourages staff to manipulate client documents to meet deadlines.

I (E). COMPETENCE

Members and Candidates must act with and maintain the competence necessary to fulfil their professional responsibilities.

II (A). MATERIAL NONPUBLIC INFORMATION

Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on information.

What can be interpreted as breaking the II (A). MATERIAL NONPUBLIC INFORMATION?

• An employee trades on news of an upcoming merger overheard in the company cafeteria.

• A junior analyst shares earnings results with friends before public release.

• A fund manager buys shares based on confidential info shared during a private meeting with the CEO.

II (B). MARKET MANIPULATION

Members and Candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.

What can be interpreted as breaking the II (B). MARKET MANIPULATION?

• A trader places large orders they intend to cancel to falsely inflate stock demand.

• A firm spreads false rumors about a competitor to drive down its share price.

• A portfolio manager coordinates trades with another firm to create artificial volume.

III (A). LOYALITY, PRUDENCE AND CARE

Members and Candidates must remain loyal to clients, act with care and sound judgment, and always put clients’ interests before their own or their employer’s.

What can be interpreted as breaking the III (A). LOYALITY, PRUDENCE AND CARE?

• An advisor executes trades that generate high commissions rather than benefit the client.

• A fund manager delays a client’s order to benefit their own personal account.

• An analyst ignores a client’s investment restrictions when buying a controversial stock.

III (B). FAIR DEALING

Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action or engaging in other professional activities.

What can be interpreted as breaking the III (B). FAIR DEALING?

• A broker gives preferred clients early access to new IPO shares.

• An investment manager provides a new stock recommendation only to select accounts.

• A financial advisor hosts exclusive webinars for high-net-worth individuals while withholding insights from others.

III (C). SUITABILITY

1. When advising clients, Members and Candidates must:

A. Assess the client’s experience, goals, risk tolerance, and financial constraints before making recommendations, and update this information regularly.
B. Ensure any investment suits the client’s financial situation and aligns with their documented objectives and constraints.
C. Evaluate suitability in the context of the client’s overall portfolio.

2. When managing a portfolio following a defined mandate or strategy, Members and Candidates must ensure that all investment decisions align with the portfolio’s stated objectives and constraints.

What can be interpreted as breaking the III (C). SUITABILITY?

• A retired client is sold high-risk derivatives without discussing risk tolerance.

• A junior analyst recommends leveraged ETFs to a conservative investor.

• An advisor fails to update a client’s profile and continues to recommend aggressive growth stocks.

III (D). PERFORMANCE PRESENTATION

When communicating investment performance information, Members and Candidates must make reasonable efforts to ensure that it is fair, accurate and complete.

What can be interpreted as breaking the III (D). PERFORMANCE PRESENTATION?

• A manager cherry-picks top-performing accounts to showcase in a client report.

• A firm advertises hypothetical returns without disclosing assumptions or limitations.

• An advisor uses outdated benchmark comparisons to inflate performance results.

III (E). PRESERVATION OF CONFIDENTIALITY

Members and Candidates must keep client information confidential unless:

1. it relates to illegal activity,

2. disclosure is required by law, or

3. the client permits it.

They should avoid sharing client information, follow their firm’s data policies, and use communication methods that protect confidentiality.

What can be interpreted as breaking the III (E). PRESERVATION OF CONFIDENTIALITY?

• An employee discusses a client’s investment losses at a public café.

• A CFA charterholder shares client data with a third-party vendor without consent.

• An analyst reveals a celebrity client’s portfolio during a conference.

IV (A). LOYALTY

In matters related to their employment, Members and Candidates must act in the best interest of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information or otherwise cause harm to their employer.

What can be interpreted as breaking the IV (A). LOYALTY?

• An employee uses proprietary client lists to solicit business for a new firm.

• A departing manager downloads confidential files before resigning.

• A staff member recommends a friend’s firm over their employer’s service without disclosure.

IV (B). ADDITIONAL COMPENSATION ARRANGEMENTS

Members and Candidates must not accept gifts, benefits, compensation or consideration that competes with or might reasonably be expected to create a conflict of interest with their employer’s interest unless they obtain written consent from all parties involved.

What can be interpreted as breaking the IV (B). ADDITIONAL COMPENSATION ARRANGEMENTS?

• A fund manager accepts bonuses from a third-party distributor without telling their employer.

• An analyst receives side payments from a hedge fund to promote its strategy.

• A portfolio advisor earns referral fees from a tax consultant but does not disclose them.

IV (C). RESPONSIBILITIES OF SUPERVISORS

Members and Candidates must make reasonable efforts to ensure that anyone subject to their supervision or authority complies with applicable laws, rules, regulations, and the Code and Standards.

What can be interpreted as breaking the IV (C). RESPONSIBILITIES OF SUPERVISORS?

• A supervisor ignores clear signs of insider trading by a team member.

• A senior manager fails to implement compliance training for new hires.

• A director allows lax recordkeeping that leads to regulatory violations by junior staff.

V (A). INVESTMENT ANALYSIS, RECOMMENDATIONS AND ACTIONS

Members and Candidates must act diligently, independently, and thoroughly in investment analysis and decisions, ensuring all actions are based on sound research and a reasonable basis.

What can be interpreted as breaking the V (A). INVESTMENT ANALYSIS, RECOMMENDATIONS AND ACTIONS?

• A research analyst issues a buy rating without reviewing the company’s financials.

• An advisor recommends a complex investment without understanding its structure.

• A manager promotes an AI-based trading algorithm based solely on vendor claims.

V (B) COMMUNICATION WITH CLIENTS AND PROSPECTIVE CLIENTS

Members and Candidates must:

1. Clearly explain the services offered and their associated costs.

2. Describe their investment process and notify clients of any significant changes.

3. Disclose key risks and limitations of the investment approach.

4. Use sound judgement to highlight relevant factors in their advice.

5. Clearly distinguish facts from opinions in their communications.

What can be interpreted as breaking the V (B). COMMUNICATION WITH CLIENTS AND PROSPECTIVE CLIENTS?

• An advisor withholds the potential downsides of an investment from a client.

• A manager fails to update clients about significant changes in portfolio strategy.

• A research report provides conclusions without explaining the underlying assumptions.

V (C). RECORD RETENTION

Members and Candidates must develop and maintain appropriate records to support their investment analyses, recommendations, actions, and other investment-related communications with clients and prospective clients.

What can be interpreted as breaking the V (C). RECORD RETENTION?

• An analyst deletes client email correspondence older than 12 months without backup.

• A firm neglects to archive research notes used in investment recommendations.

• A financial advisor fails to document suitability reviews for regulatory audits.

VI (A). AVOID OR DISCLOSE CONFLICTS

Members and Candidates must avoid or fully disclose any matters that could affect their independence, objectivity, or duties to clients, prospects, or employers. Disclosures must be clear, prominent, and in plain language.

What can be interpreted as breaking the VI (A). AVOID OR DISCLOSE CONFLICTS?

• An advisor promotes a fund in which they hold a personal stake without disclosure.

• A manager sits on a board of a company whose stock is in client portfolios, undisclosed.

• A consultant fails to mention referral fees when recommending a third-party service.

VI (B). PRIORITY OF TRANSACTIONS

Investment transactions for clients and employers must have priority over transactions in which a Member or Candidate is the beneficial owner.

What can be interpreted as breaking the VI (B). PRIORITY OF TRANSACTIONS?

• A broker trades a hot IPO in their own account before placing client orders.

• A portfolio manager allocates limited bond issues to family accounts first.

• A CFA charterholder delays executing a client’s trade to benefit from market movements.

VI (C). REFERRAL FEES

Members and Candidates must disclose to their employer, clients and prospective clients, as appropriate, any compensation, consideration or benefit received from or paid to others for the recommendation of products or services.

What can be interpreted as breaking the VI (C). REFERRAL FEES?

• An advisor receives a bonus from a mutual fund company for referrals, undisclosed.

• A wealth manager directs clients to a tax service and earns commissions secretly.

• A consultant hides compensation received for steering clients to a new fintech app.

VII (A). RESPONSIBILITIES AS A CFA INSTITUTE MEMBER OR CFA CANDIDATE

Members and Candidates must not engage in any conduct that compromises the reputation or integrity of CFA Institute or the CFA designation or the integrity, validity, or security of CFA Institute programs.

What can be interpreted as breaking the VII (A). RESPONSIBILITIES AS A CFA INSTITUTE MEMBER OR CFA CANDIDATE?

• A candidate discusses specific exam questions on social media.

• A test-taker uses unauthorized study materials leaked from a past exam.

• A CFA candidate impersonates someone else during the Level II exam.

VII (B). REFERENCE TO CFA INSTITUTE, THE CFA DESIGNATION AND THE CFA PROGRAM

Members and Candidates must not misrepresent or overstate the meaning or significance of CFA Institute membership, the CFA designation, or CFA candidacy.

What can be interpreted as breaking the VII (B). REFERENCE TO CFA INSTITUTE, THE CFA DESIGNATION AND THE CFA PROGRAM?

• An analyst claims to be a “CFA certified” professional on LinkedIn.

• A candidate writes “CFA Level III” on business cards as a credential.

• A firm advertises all employees as “CFA-qualified” without verification.