Ethics and Professional Standards Flashcards

A research analyst writes a favorable report on a company whose CFO is the analyst's personal friend. Under Standard VI(A) – Disclosure of Conflicts, the analyst must:

Answer: Disclose the personal relationship to clients and the employer

Standard VI(A) requires members to disclose all potential conflicts of interest, including personal relationships, to both clients and employers.

Which of the following best illustrates a violation of Standard I(B) – Independence and Objectivity?

Answer: An analyst accepting a large gift from a client in exchange for a favorable rating

Accepting gifts that could influence professional judgment violates Standard I(B), which requires members to maintain independence and objectivity.

Standard VII(B) requires CFA candidates and members to:

Answer: Both B and C

Standard VII(B) requires members to act with dignity and honesty during the exam and to maintain the confidentiality of exam questions and content.

When a member manages a fund that competes with a client's separately managed account, which standard is most relevant?

Answer: Standard VI(A) – Disclosure of Conflicts

Managing competing funds creates a potential conflict of interest that must be disclosed to clients under Standard VI(A).

If local law permits an activity that violates the CFA Standards, a member operating in that jurisdiction must:

Answer: Follow the CFA Standards, which set a higher ethical bar

Members must always follow the CFA Standards when they are stricter than local law, as the Standards represent the higher ethical requirement.

Which of the following is NOT a component of the CFA Institute Professional Conduct Program?

Answer: Mandatory reporting of violations by member employers

The Professional Conduct Program relies on self-disclosure, public complaints, and investigations, but employers are not mandated to report violations on members' behalf.