Ethics and Professional Standards Flashcards

Standard III(A) – Loyalty, Prudence, and Care requires that members place whose interests first when managing a portfolio?

Answer: Clients' interests

Standard III(A) requires members to act in their clients' best interests and place client interests before their own or their employer's.

Which of the following is required under Standard III(B) – Fair Dealing when disseminating investment recommendations?

Answer: Ensuring all clients have an equal opportunity to act on new recommendations

Fair dealing requires that all clients have an equal opportunity to act on new recommendations, though simultaneous communication and identical recommendations are not strictly required.

Under Standard V(A) – Diligence and Reasonable Basis, an analyst recommending a complex derivative product must:

Answer: Have a reasonable and adequate basis supported by appropriate research

Standard V(A) requires analysts to have a reasonable, adequately researched basis for any investment recommendation, regardless of product complexity.

The Global Investment Performance Standards (GIPS) are primarily designed to:

Answer: Ensure fair representation and full disclosure of investment performance

GIPS standards ensure investment firms present performance results fairly and completely, allowing clients to make meaningful comparisons.

Which of the following is a violation of Standard VI(B) – Priority of Transactions?

Answer: A portfolio manager front-running by trading personal accounts before executing client trades

Front-running—trading personal accounts ahead of client orders to benefit from anticipated price movements—violates Standard VI(B).

Under the Asset Manager Code, a manager that exercises proxy voting authority must:

Answer: Vote proxies in the best interest of clients

The Asset Manager Code requires managers to exercise proxy voting authority in the best interest of their clients, not management or other parties.