Ethical & Professional StandardsModule 3 of 5

Guidance for Standards I–VII

Concepts

Formulas

Decisions

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

Study Guidance for Standards I–VII

This module has 9 flashcards and 5 quiz questions to test your knowledge.

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Code of Ethics and Standards of Professional Conduct

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Introduction to GIPS