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Ethical & Professional StandardsModule 3 of 5

Guidance for Standards I–VII

8

Concepts

0

Formulas

1

Decisions

5

Quiz Questions

Key Concepts

8 concepts covered in this module.

I(A) Knowledge of the Law

Must understand and comply with applicable laws and regulations. Follow the stricter of law or CFA Standards. Must dissociate from violations.

I(B) Independence & Objectivity

Must not offer/accept gifts that could compromise independence. Research must be free from issuer influence. Disclose conflicts.

I(C) Misrepresentation

Must not misstate facts about investment analysis, recommendations, actions, or professional qualifications. Includes plagiarism.

II(A) Material Nonpublic Information

Cannot trade or cause others to trade on MNPI. Mosaic theory: combining public and non-material nonpublic info IS allowed.

III(A) Loyalty, Prudence, Care

Fiduciary duty: act in client's best interest. Determine who the client is. Exercise prudence and care in investment decisions.

III(C) Suitability

Must gather client information (IPS) and ensure recommendations are suitable for the client's situation, risk tolerance, and objectives.

IV(A) Loyalty to Employer

Must act in employer's interest, not take proprietary information when leaving. Can prepare to leave but not solicit clients before departure.

VI(A-C) Conflicts of Interest

Disclose all conflicts (compensation, ownership, board seats). Priority of transactions: clients > employer > personal. Disclose referral fees.

Decision Frameworks

1 decision frameworks to guide your analysis.

Mosaic Theory: When can you trade on nonpublic info?

  • Mosaic theory: combine public info + non-material nonpublic info to form a conclusion
  • Conclusions from public analysis, industry research, expert network (public channels)

Mind Map

Visual overview of how concepts connect in this module.

Standards I–VII
I: Professionalism
Know the law (stricter rule)
Independence & objectivity
No misrepresentation
No misconduct
Maintain competence
II: Market Integrity
No trading on MNPI
Mosaic theory allowed
No market manipulation
III: Clients
Fiduciary duty
Fair dealing
Suitability (IPS)
Accurate performance
Confidentiality
IV-VII
Employer loyalty
Supervisor duties
Diligent analysis
Disclose conflicts
Priority of transactions
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I(A) Knowledge of the Law

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Answer
Must understand and comply with applicable laws and regulations. Follow the stricter of law or CFA Standards. Must dissociate from violations.
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Code of Ethics and Standards of Professional Conduct

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Introduction to GIPS