Ethics and Professional Standards - I

Benchmarks for minimally acceptable behaviors of community members are:

• a code of ethics.

• laws and regulations.

• standards of conduct.

Situational influences in decision making will most likely be minimized if:

• strong compliance programs are in place.

• longer-term

  consequences are considered.

• individuals believe they are truthful and honest.

When unethical behavior erodes trust in an investment firm, that firm is more

likely to experience:

• lower revenues only.

• higher expenses only.

• lower revenues and higher expenses.

Fiduciary duty is a standard most likely to be upheld by members of a(n):

• employer.

• profession.

• not-for-

  profit

  body.

Which of the following statements best describes an aspect of the Professional

Conduct Program process?

• Inquiries are not initiated in response to information provided by the media.

• Investigations result in Disciplinary Review Committee panels for each case.

• Investigations may include requesting a written explanation from the member

  or candidate.

Which of the following responses most completely represents an ethical principle

of CFA Institute as outlined in the Standards of Practice Handbook?

• Individual professionalism

• Responsibilities to clients and employers

• Ethics involved in investment analysis and recommendations

Based on the Conflicts of Interest standard, members and candidates must:

• disclose, as required by law, those conflicts interfering with their professional

  duties.

• disclose, as appropriate, any benefit paid to others for the recommendation

  of products.

• seek employer approval before prioritizing their investment transactions

  over those clients.

Jamison is a junior research analyst with Howard & Howard, a brokerage and

investment banking firm. Howard & Howard’s mergers and acquisitions department

has represented the Britland Company in all of its acquisitions for the past

20 years. Two of Howard & Howard’s senior officers are directors of various

Britland subsidiaries. Jamison has been asked to write a research report on

Britland. What is the best course of action for her to follow?

• Jamison may write the report but must refrain from expressing any opinions

  because of the special relationships between the two companies.

• Jamison should not write the report because the two Howard & Howard

  officers serve as directors for subsidiaries of Britland.

• Jamison may write the report if she discloses the special relationships with

  the company in the report.

Smith, a research analyst with a brokerage firm, decides to change his recommendation for the common stock of Green Company, Inc., from a “buy” to

a “sell.” He mails this change in investment advice to all the firm’s clients on

Wednesday. The day after the mailing, a client calls with a buy order for 500

shares of Green Company. In this circumstance, Smith should:

• Accept the order.

• Advise the customer of the change in recommendation before accepting the

  order.

• Not accept the order because it is contrary to the firm’s recommendation.

Albert and Tye, who recently started their own investment advisory business,

have registered to take the Level III CFA examination. Albert’s business card

reads, “Judy Albert, CFA Level II.” Tye has not put anything about the CFA

designation on his business card, but promotional material that he designed

for the business describes the CFA requirements and indicates that Tye participates

in the CFA Program and has completed Levels I and II. According to the

Standards:

• Albert has violated the Standards, but Tye has not.

• Tye has violated the Standards, but Albert has not.

• Both Albert and Tye have violated the Standards.