Ethics Exam [Q & A]

🔹 Code of Ethics – Flashcards

1. Act with Integrity
Be honest, trustworthy, and ethical in all actions.
📌 Violation: Lying about investment experience.

2. Put Clients First
Always prioritize client interests over personal gain.
📌 Violation: Recommending a product for higher commission.

3. Act with Competence
Work within your abilities and commit to learning.
📌 Violation: Advising on unfamiliar international markets.

4. Promote Ethical Behavior
Encourage others to act ethically in the workplace.
📌 Violation: Ignoring insider trading by a colleague.

5. Follow Laws and Rules
Comply with laws, regulations, and CFA standards.
📌 Violation: Using inside information legally abroad.

6. Protect the Profession
Act in a way that upholds the finance profession.
📌 Violation: Posting offensive opinions under CFA title.

🔹 Standards of Professional Conduct – Flashcards

I. Professionalism

1. Knowledge of the Law
Understand and follow laws and ethical codes.
📌 Violation: Failing to report illegal trading.

2. Independence and Objectivity
Avoid influence from gifts or pressure.
📌 Violation: Accepting concert tickets from a client.

3. Misrepresentation
Be truthful in all communications and promotions.
📌 Violation: Exaggerating past performance.

4. Misconduct
Avoid dishonest or damaging behavior.
📌 Violation: Getting caught in a fraud case.

II. Integrity of Capital Markets

1. Material Nonpublic Info
Don’t trade on or share insider information.
📌 Violation: Trading before merger news is public.

2. Market Manipulation
Avoid actions that distort market prices or info.
📌 Violation: Spreading rumors to move stock price.

III. Duties to Clients

1. Loyalty, Prudence, and Care
Act in the client’s best interest with diligence.
📌 Violation: Trading ahead of a client’s order.

2. Fair Dealing
Offer equal opportunities to all clients.
📌 Violation: Giving new info to favored clients only.

3. Suitability
Match investment recommendations to client goals.
📌 Violation: Suggesting risky assets to retirees.

4. Performance Presentation
Present accurate and complete return data.
📌 Violation: Cherry-picking to show only good results.

5. Confidentiality
Protect all client data unless legally required.
📌 Violation: Sharing portfolio info at a party.

IV. Duties to Employers

1. Loyalty
Don’t harm or compete against your employer unfairly.
📌 Violation: Secretly running a side business.

2. Extra Compensation
Disclose any additional income or rewards.
📌 Violation: Earning consulting fees in secret.

3. Supervisory Responsibility
Ensure those you oversee follow standards.
📌 Violation: Ignoring team’s ethical breaches.

V. Investment Analysis and Actions

1. Diligence and Basis
Make investment decisions on solid research.
📌 Violation: Recommending stocks with no analysis.

2. Client Communication
Explain investment processes, risks, and updates.
📌 Violation: Hiding potential losses from a client.

3. Record Retention
Keep research and analysis records properly.
📌 Violation: Deleting client reports prematurely.

VI. Conflicts of Interest

1. Disclose Conflicts
Tell clients about anything that could bias you.
📌 Violation: Hiding personal holdings in stock.

2. Priority of Transactions
Put client trades before your own.
📌 Violation: Buying for yourself ahead of a client.

3. Referral Fees
Tell clients if you earn from a referral.
📌 Violation: Referring a service without disclosure.