Application of the Code and Standards: Level II

Introduction

This reading presents cases to illustrate how the CFA Institute Code of Ethics and Standards of Professional Conduct (Code and Standards) can be applied in situations requiring professional and ethical judgement. Exhibit 1 presents a useful framework to help guide individuals in their ethical decision-making process and application of the Code and Standards. By identifying where the Code and Standards might be relevant and considering actions and consequences within this framework, individuals can make more ethically sound decisions.

Although the framework’s components do not need to be addressed in the sequence shown, a review of the outcome should conclude the process. This review provides insights for improved decision making in the future.

This reading presents a number of scenarios involving individuals in private and institutional asset management. The first four cases focus on identifying whether violations of the Code and Standards occurred, with discussion and rationale as to why or why not a violation may have taken place. The last two cases focus on identifying violations of the Code and Standards, taking necessary corrective actions, and developing a policy statement to help prevent future violations by a firm’s employees. As you read through these cases, consider how applying the framework might have helped each individual to make decisions.

The member should be able to:

1. evaluate practices, policies, and conduct relative to the CFA Institute Code of Ethics and Standards of Professional Conduct;

2. explain how the practices, policies, and conduct do or do not violate the CFA Institute Code of Ethics and Standards of Professional Conduct.