Ethical and Professional Standards: Study Session 1
Study Session Materials
Complete List of CFA Program Readings
Topic Overview
Ethical and Professional Standards
The readings in this study session present a framework for ethical conduct in the investment profession by focusing on the CFA Institute Code of Ethics and Standards of Professional Conduct as well as the CFA Institute Soft Dollar Standards and the CFA Institute Research Objectivity Standards.
The principles and guidance presented in the CFA Institute Standards of Practice Handbook (SOPH) form the basis for the CFA Institute’s self-regulatory program to maintain the highest professional standards among investment practitioners. A clear understanding of the CFA Institute Code of Ethics and Standards of Professional Conduct (both found in the SOPH) should allow the practitioner to identify and appropriately resolve ethical conflicts. The resulting recognition for integrity should benefit both the individual and the profession. “Guidance” in the SOPH addresses the practical application of the Code of Ethics and Standards of Professional Conduct. The guidance reviews the purpose and scope of each Standard, presents recommended procedures for compliance, and provides examples of the Standard in practice.
The CFA Institute Soft Dollar Standards and CFA Institute Research Objectivity Standards address contemporary issues for which CFA Institute has felt further, more specific guidance is warranted. Both documents are consistent with and complement the CFA Institute Code of Ethics and Standards of Professional Conduct.
Soft dollar payment arrangements, involving the investment manager’s use of client brokerage to obtain services related to the manager’s investment decisionmaking process, have become extremely complex. As a consequence, ethically ambiguous situations can arise in which it is not immediately clear that the manager remains in compliance with the obligation, under the CFA Institute Code of Ethics, to place client interests ahead of personal or firm interests. The Soft Dollar Standards provide guidance on what services and products are appropriate for purchase with client brokerage, the appropriate disclosure of soft dollar practices, and the necessary record keeping.
Investment research objectivity should be the logical consequence of ethical conduct, consistent with the CFA Institute Code of Ethics and Standards of Professional Conduct, in which client interests are placed first and conflicts of interest are fully disclosed. When temptation or pressure leads to biased or misleading research reports, the integrity of all financial professionals is tainted. The CFA Institute Research Objectivity Standards present specific policies and procedures designed to create a research environment in which conflicts of interests and opportunities for ethical lapses are minimized and disclosed.
View learning outcome statements (LOS) for reading objectives.
Complete List of CFA Program Readings
|
“Code of Ethics and Standards of Professional
Conduct” Standards of Practice Handbook, 9th edition (CFA Institute, 2005) Free download (PDF) |
View LOS | |
|
“Guidance” for Standards I – VII Standards of Practice Handbook, 9th edition (CFA Institute, 2005) Free download (PDF) |
View LOS | |
|
“CFA Institute Soft Dollar Standards” (AIMR, 1998; reprinted 2004) Free download (PDF) |
View LOS | |
|
“CFA Institute Research Objectivity Standards” (AIMR, 2003; reprinted 2005) Free download (PDF) |
View LOS |