Guidance for Standards I-VII

Members and candidates must comply with all applicable laws and regulations in the jurisdictions where they operate. This includes understanding and adhering to stricter laws when conflicts arise between different jurisdictions or between local laws and the CFA Institute's standards.

If members or candidates become aware of unethical or illegal activities, they must dissociate from those activities. This may involve reporting the issue internally, refusing to participate, or even resigning if necessary to avoid complicity.

When dealing with investment products, members and candidates must be aware of the laws and regulations applicable to both the origin and distribution of these products. This ensures compliance and protects the reputation of the firm and the individual.

Members and candidates working across different jurisdictions must adhere to the stricter of the local laws or the CFA Institute's Code and Standards, ensuring the highest standard of professionalism and ethical conduct.

Members and candidates should establish or encourage their employers to establish procedures to keep employees informed about changes in laws, rules, regulations, and case law. This can be achieved through memorandums from the compliance department or legal counsel, and participation in continuing education programs.

It is recommended that members and candidates review or encourage their employers to review the firm's compliance procedures regularly. This ensures that the procedures are up-to-date with current laws and provide clear guidance on permissible conduct.

Members and candidates should maintain or encourage their employers to maintain accessible reference copies of applicable statutes, rules, regulations, and important cases to ensure compliance and readiness for reference when needed.

Members and candidates should make reasonable efforts to understand the laws applicable in the countries and regions where their investment products are developed and distributed.

When unsure about the appropriate actions to take, members and candidates are advised to seek guidance from compliance personnel or legal counsel, especially if potential violations are observed.

In cases where there is a violation of the Code and Standards, members and candidates should document the violation, urge cessation, and may need to dissociate from the activity, potentially by resigning.

Members and candidates should encourage their firms to develop or adopt a code of ethics, provide information on applicable laws, and establish procedures for reporting violations to support the principles of Standard I(A).

Individuals are encouraged to report any known violations to appropriate authorities or supervisors within their firms, even if legal counsel suggests that involvement may be difficult to prove.

If an individual discovers unethical practices within their firm and these are not addressed after reporting, the individual should dissociate from the activity, which may include severing connections with the project or seeking employment elsewhere.

Professionals must adhere to the most stringent ethical and legal standards available, whether those are set by local laws, the host country's laws, or the CFA Institute's standards, especially in cases where local regulations may be less rigorous.

Professionals must be aware of and respect cultural and religious laws when managing funds or advising clients from different cultural or religious backgrounds.

Employees should follow established procedures within their firms for reporting unethical behavior, which may include discussions with supervisors or compliance departments.

Professionals must keep themselves updated with all relevant laws and regulations, including those governing new technologies and platforms they use to communicate with clients.

Members and candidates must not accept gifts, benefits, or compensation that could be expected to compromise their objectivity and independence. Modest gifts and entertainment are permissible, but care must be taken to avoid any appearance of bias.

Analysts must conduct issuer-paid research with independence and disclose any potential conflicts of interest, including the nature of their compensation. The research must be based on thorough, unbiased analysis and clearly differentiate between facts and opinions.

Sell-side firms may pressure analysts to produce favorable research for investment banking clients. Best practices include maintaining strict firewalls between research and investment banking divisions to prevent conflicts of interest.

Performance analysts must maintain objectivity when evaluating investment managers' adherence to their mandates and must resist any internal or external pressures to alter performance results.

Accepting travel funding from companies can compromise independence. Members and candidates should use commercial transportation at their own or their firm's expense to avoid conflicts of interest.

Members and candidates should ensure that research reports reflect unbiased opinions and that compensation systems do not compromise the independence of analysts.

Firms should create a restricted list for companies about which they cannot disseminate adverse opinions, limiting dissemination to only factual information.

Members should pay for their own travel and accommodations when visiting issuer's headquarters and avoid accepting reimbursements for such expenses from corporate issuers.

Members must limit the acceptance of gifts to token items and ensure that business-related entertainment does not serve to influence or reward them.

Investment firms should develop formal policies regarding employee participation in IPOs and private placements, requiring prior approval and prompt disclosure of investment actions.

Firms should implement supervisory and review procedures to ensure compliance with personal investment activity policies.

A formal written policy should be established to maintain the independence and objectivity of research, with appropriate reporting structures and review procedures.

A senior officer should be appointed to oversee compliance with the firm's ethical code and regulations, and procedures should be in place for reporting unethical behavior or regulatory violations.

Professionals must ensure that their judgments and recommendations are not influenced by potential conflicts of interest, whether from internal pressures, external relationships, or personal gain.

When potential conflicts of interest arise, it is crucial for professionals to disclose these conflicts to their supervisors or relevant parties to maintain transparency and trust.

Professionals must resist pressures from within their organization or from external entities that might compromise their objectivity or push them towards unethical practices.

Accepting gifts or entertainment can be permissible under certain conditions, but must always be disclosed and should not influence business decisions or actions.

Compensation structures should not create incentives that might lead professionals to act against the interests of their clients or compromise their objectivity.

Members and candidates must accurately represent all aspects of their practice including qualifications, services, performance records, and investment characteristics to maintain trust and integrity in the investment profession.

Misrepresentations in performance reporting can occur through inappropriate benchmark selection or inconsistent reporting standards. Best practices involve transparent and appropriate benchmark presentation to aid clients in making informed investment decisions.

The use of social media by members and candidates must adhere to the same standards of honesty and integrity as traditional forms of communication. Misrepresentations through these platforms are considered violations of Standard I(C).

Omitting crucial information, especially in the use of models and technical analysis, can mislead investors. Members and candidates must ensure all relevant information is included to provide a true and fair view of the investment opportunities.

Copying or using materials prepared by others without proper acknowledgment is prohibited. Members and candidates must credit original sources to avoid misrepresentation and maintain professional integrity.

Research and models developed within a firm are the property of the firm. Members and candidates must respect these rights and avoid misrepresentations when using or sharing such work.

Members and candidates should ensure that all presentations and communications with clients or potential clients are accurate and complete. Firms should guide employees on how to describe services and qualifications accurately without misrepresentation.

Members and candidates should prepare a summary of their qualifications and capabilities to ensure accurate presentations to clients. Firms should assist by periodically reviewing representations of qualifications in communications.

When using third-party information in client communications, members and candidates must verify the accuracy of this information to prevent misrepresentation and maintain integrity.

Members and candidates should regularly monitor their webpages to ensure the information is current, accurate, and does not misrepresent any facts. This includes maintaining the security and confidentiality of the webpage.

To avoid plagiarism, members and candidates should maintain records of all research materials and sources used in preparing reports, attribute direct quotations and summaries to their sources, and ensure all paraphrased material is properly attributed.

Analysts must disclose any contractual relationships with companies they cover to avoid misleading potential investors, even if their research is valid and thorough.

When errors in published information are discovered, they must be corrected promptly to prevent the spread of misinformation, even if the errors were unintentional.

Failing to correct known errors, especially when they involve misrepresentation of qualifications or other critical information, constitutes a violation of Standard I(C).

Using others' work without proper attribution, whether it's data, text, or ideas, is a violation of Standard I(C). Proper credit must be given to the original sources.

Providing false or misleading information about investment products, such as guarantees or risk levels, violates Standard I(C). Accurate and truthful representation is crucial.

Advisors must clarify the terms under which certain financial products are 'guaranteed' and ensure clients understand the conditions and limitations of such guarantees.

Choosing not to invest in securities that the team cannot fully understand or explain to clients helps in complying with Standard I(C) by avoiding potential misrepresentations.

"Cherry picking" accounts to manipulate performance data in reports is a misrepresentation and violates Standard I(C). Transparency in composite construction is required.

Distributing outdated information that does not reflect current conditions or changes in investment products misleads clients and violates Standard I(C).

Highlighting only the positive outcomes from a subset of funds while ignoring broader performance can mislead potential clients about the overall success of the firm.

Misconduct under Standard I(D) includes any professional conduct involving dishonesty, fraud, deceit, or any act that reflects adversely on a member's professional reputation, integrity, or competence.

Personal behavior that negatively impacts trustworthiness or competence, even if not illegal, can constitute a violation of Standard I(D). Examples include substance abuse during business hours or fraudulent activities leading to personal bankruptcy.

To prevent misconduct, members and candidates should encourage their firms to adopt ethical codes, disseminate lists of potential violations with disciplinary actions, and verify the character and eligibility of potential employees.

Real-world examples, such as a trust investment officer exhibiting poor judgment due to intoxication, illustrate the application of Standard I(D) and the importance of maintaining professionalism and competence in all professional activities.

Personal bankruptcy does not necessarily impact a person's integrity unless it involves fraudulent or deceitful business conduct, which would then be a violation of Standard I(D).

Members and candidates are expected to conduct necessary due diligence before making investment recommendations. Failure to do so can breach client trust and damage the reputation of the financial market.

There are instances where individuals may misuse the CFA Institute Professional Conduct Program to settle personal or political disputes. The CFA Institute has policies to handle such misuse.

Firms are encouraged to adopt specific policies such as a code of ethics, a list of violations with disciplinary actions, and thorough checks on potential employees' references to support Standard I(D).

An example provided involves a trust investment officer who makes professional decisions while intoxicated, demonstrating a lack of professionalism and competence, potentially violating Standard I(D).

Professionalism and competence are crucial in maintaining the integrity of the investment profession. Actions that compromise these, such as intoxication during work hours, reflect poorly on the individual and the profession, violating Standard I(D).

Engaging in fraudulent or deceitful activities, such as altering reimbursement forms or manipulating purchasing agreements for personal gain, directly violates Standard I(D) as these actions compromise the integrity and trust placed in professionals.

Personal actions, even if legal or part of civil disobedience, do not necessarily violate Standard I(D) if they do not reflect poorly on professional integrity or competence. For example, nonviolent protests for personal beliefs are generally not covered under this standard.

Encountering and not reporting unethical activities within a firm, especially when they affect financial reporting or performance, can be seen as professional misconduct under Standard I(D). Professionals are encouraged to report such activities to maintain integrity.

Competence refers to having the appropriate knowledge, skills, and abilities required to perform professional duties effectively. It involves applying information directly to the performance of functions, the capability to perform specific tasks, and the attitudes that support successful outcomes.

Members and candidates are encouraged to continuously maintain or improve their professional competence. This involves regular participation in professional development activities, earning certifications, and engaging in self-study to stay updated with relevant knowledge and skills.

To maintain competence, members and candidates should engage in activities such as attending conferences, seminars, webinars, participating in training offered by employers, and joining expert groups or organizations. These activities help professionals stay competent in their roles and adapt to new or expanded responsibilities.

Competence refers to having the necessary knowledge, skills, and abilities to perform a professional role successfully. It is not solely determined by educational achievements but also by the effective application and continuous development of these attributes.

Continuous professional development involves regularly engaging in activities that enhance one's professional abilities and knowledge. This can include formal education programs, self-study, attending seminars, and participating in relevant training and conferences.

Professionals are required to adapt and update their competence when their job roles change or expand. This may involve acquiring new skills or knowledge to meet the demands of the new responsibilities effectively.

Professionals must continuously update their knowledge and skills relevant to their job functions. This involves staying informed about significant developments in their field and consulting with experts to ensure accurate understanding.

When new elements such as ESG considerations become relevant to a professional's role, it is crucial to acquire the necessary knowledge and skills, either through hiring experts, training, or certification.

Transitioning to a new role requires understanding and mastering the specific knowledge and skills pertinent to that role. Merely relying on past experience or unrelated knowledge does not suffice.

Upon assuming a supervisory role, a professional must acquire management and compliance skills in addition to maintaining their existing expertise to effectively oversee their team.

Financial planners must conduct thorough and appropriate research before recommending investments. However, unforeseen events like fraud that were not detectable through reasonable investigation do not necessarily reflect incompetence.

Professionals should not engage in or recommend new investment products without a thorough understanding of their nature and suitability for clients, regardless of market trends or client pressure.

Information is considered 'material' if its disclosure would likely impact the price of a security or if reasonable investors would want to know the information before making an investment decision. Factors such as the specificity, difference from public information, nature, and reliability of the information help determine its materiality.

Information is 'nonpublic' until it has been disseminated to the marketplace in general. This includes ensuring the information is available beyond a select group of investors and is widely accessible through common channels like press releases or internet postings.

Under the mosaic theory, analysts can use a combination of public and nonmaterial nonpublic information to form investment recommendations. This theory supports the idea that analysts can derive conclusions from a broad array of data without violating the standard concerning material nonpublic information.

The use of social media in disseminating or gathering information must be handled carefully to ensure that any material information shared is already public or becomes public through proper channels to avoid selective disclosure.

While engaging with industry experts can provide valuable insights, members and candidates must ensure that they do not receive or act upon confidential or protected information that could be considered material nonpublic.

Analysts' reports based on public information and nonmaterial nonpublic information (mosaic theory) do not necessarily have to be made public if they are the result of the analyst's own research and analysis.

Members should make reasonable efforts to publicly disseminate material information, primarily by encouraging the issuing company to make the information public. If not possible, the information should be restricted to supervisory and compliance personnel without taking investment action based on it.

Firms are encouraged to adopt compliance procedures that prevent the misuse of material nonpublic information, including reviewing trading activities, documenting procedures, and supervising interdepartmental communications.

Firms should develop and follow disclosure policies to ensure equitable dissemination of information to the marketplace, avoiding discrimination among analysts or providing selective information.

Companies should issue press releases prior to analyst meetings and script such meetings to prevent the disclosure of additional material nonpublic information.

Firewalls prevent the communication of material nonpublic information within firms. Elements include controlling interdepartmental communications, reviewing employee trading, documenting procedures, and restricting proprietary trading when possessing sensitive information.

Firms should document and formalize procedures concerning interdepartmental communication to prevent the leakage of sensitive information.

Firms should impose restrictions on personal trading by employees, monitor trading activities, and require periodic reporting of transactions.

Firms should maintain written records of communications between departments and prioritize training to handle sensitive information appropriately.

Firms should have procedures to manage proprietary trading when in possession of material nonpublic information, adjusting activities based on the type of trading involved.

Firms should circulate written compliance policies to all employees and provide training to recognize and handle material nonpublic information correctly.

Information that could influence the market price of a security and that has not been made available to the public. Using such information for trading purposes is considered unethical and illegal in many jurisdictions.

A legitimate research approach where an analyst pieces together non-material nonpublic information with public information to make investment decisions. This practice is permissible under Standard II(A) as it does not rely solely on material nonpublic information.

Occurs when material information is disclosed to a select group rather than the public, leading to potential unfair advantages. Analysts receiving such information must verify its public availability before acting on it.

Firms are required to establish barriers and enforce policies to prevent the misuse of nonpublic information, ensuring that it does not inadvertently or deliberately influence unauthorized trading activities.

Networks used to gain insights from industry experts. While using expert networks is allowed, care must be taken to ensure that no material nonpublic information is exchanged during such consultations.

This type of manipulation involves spreading false or misleading information to influence market prices. Examples include issuing overly optimistic information about a security to inflate its price artificially, then selling it at this inflated price.

This manipulation occurs through trading actions that misleadingly affect market prices or volumes, such as conducting trades that give a false impression of market activity or controlling a significant portion of a security to manipulate its price or the price of related derivatives.

Standard II(B) does not prevent transactions based on legitimate trading strategies that aim to capitalize on market inefficiencies. The critical factor in determining a violation is the intent behind the transactions, whether they aim to deceive or manipulate market participants.

Using misleading information or inaccurate reporting under the guise of independent analysis to artificially inflate stock prices violates Standard II(B).

Creating false market perceptions through rumor campaigns and strategic trading to maintain or increase stock prices constitutes a violation.

Timing the release of speculative or inaccurate research reports to affect stock prices, especially to benefit certain clients, is a breach of Standard II(B).

Manipulating trading volumes between funds to influence stock prices, even if intended to benefit fund participants, is prohibited.

Misleading market participants about the liquidity of a financial instrument, even if the intent is to improve service, requires full disclosure to avoid violation.

Spreading false information to inflate stock prices before selling the inflated stocks ('pump and dump') is a clear violation of Standard II(B).

Using overly positive scenarios in financial models to obtain favorable ratings or prices, without considering realistic risks, manipulates market perceptions and violates the standard.

Using false identities to spread rumors affecting stock prices, regardless of personal profit, misleads investors and violates Standard II(B).

Members and candidates must prioritize client interests, act with care, and exercise prudent judgment in all investment decisions, ensuring actions are taken with the client’s best interests in mind.

It is crucial to accurately identify the client to whom loyalty is owed, which may not always be the entity hiring the investment manager but could be the beneficiaries of a trust or pension plan.

Investment strategies should be aligned with the client’s long-term objectives and risk tolerance, and potential conflicts of interest should be managed transparently.

Members and candidates must ensure that any brokerage commissions paid from client accounts for research services provide corresponding benefits to the client.

The duty of loyalty extends to voting proxies in an informed manner that maximizes value for the client, considering the economic impact of proxy votes.

Members and candidates should provide quarterly itemized statements to clients showing all account transactions and asset details, disclose asset maintenance locations, and keep client assets separate from others.

In cases of uncertainty regarding the appropriate course of action, members and candidates should seek written approval from clients after fully disclosing the matter in question.

Firms should have clear policies covering legal compliance, client investment objectives, investment suitability, diversification, regular reviews, fair treatment of clients, conflict of interest disclosures, compensation disclosures, proxy voting, client confidentiality, and seeking best execution.

Members and candidates must act for the benefit of their clients and place their clients' interests before their own or their employer's interests.

Investment actions must be made with competence and diligence, ensuring that decisions are based on thorough analysis and reflect the client's objectives.

All clients should be treated fairly. This includes providing equal access to investment opportunities and avoiding actions that advantage one client over another without just cause.

Client information must be kept confidential unless the client permits disclosure or it is required by law.

All actual and potential conflicts of interest must be disclosed to clients to allow them to make informed decisions about the services provided.

Members and candidates must seek the best execution of trades for their clients, considering the terms and conditions of the trade and the capabilities of the execution venue.

Members and candidates must ensure that investment recommendations are disseminated in a manner that allows all clients a fair opportunity to act on them. This involves managing the timing and method of communication to prevent selective or discriminatory disclosure.

When taking investment actions, such as managing portfolios or allocating new issues, members and candidates must distribute opportunities fairly among clients. This includes prorating oversubscribed issues and avoiding favoritism, even among family members unless similar management is applied to other clients.

Members and candidates should disclose the allocation procedures to clients and encourage their firms to establish compliance procedures that promote fair dealing. These procedures should be clear, documented, and communicated to all relevant parties.

Firms should establish compliance procedures to ensure all employees treat customers and clients fairly when disseminating investment recommendations or taking investment actions. Formal written procedures should be in place, especially for investment advisers, to ensure fair treatment of all clients.

Members and candidates must disclose how accounts are selected for participation in orders and how securities are allocated among accounts. These procedures must be fair and equitable, and simply disclosing inequitable methods does not absolve the member of the obligation to ensure fairness.

Regular reviews of each account should be conducted to ensure no preferential treatment is given and that investment actions are suitable for each account’s objectives. Investment decisions should be documented, especially when different actions are taken for similar accounts.

All clients should be informed about different levels of service that may be offered for the same or different fees. Such offerings should not be selective among clients to ensure fairness and transparency.

Selective disclosure refers to sharing potentially market-moving, non-public information with a subset of clients, which is a violation of fair dealing as it gives an unfair advantage to those clients over others.

This concept involves treating all client funds equitably, especially when managing multiple funds with similar objectives. Prioritizing one fund over another, or discretionary over non-discretionary accounts, without a fair system, breaches this standard.

In the context of initial public offerings (IPOs), fair dealing requires equitable distribution of shares among all eligible clients. Favoring certain clients or personal accounts violates this standard.

This involves the equitable allocation of trades among clients. Allocating profitable trades to preferred clients and unprofitable ones to others without a predefined fair system is a violation.

While offering additional services to larger clients isn't a violation per se, it becomes one if basic services or opportunities are withheld from smaller clients or if additional services are not disclosed.

This refers to the allocation of securities in situations where demand exceeds supply. A fair system, such as pro-rata allocation, should be used unless minimum lot sizes dictate otherwise.

Engaging in excessive trading to benefit one client at the expense of others, such as to secure research or other services, is unfair and violates this standard.

Using social media to disclose recommendations to a select group before a general release is considered selective disclosure and is unfair to other clients.

An IPS is a written document that outlines the client's financial circumstances, risk tolerance, return requirements, and investment constraints. It serves as a guideline for making investment decisions and is regularly updated to reflect changes in the client's situation or objectives.

Understanding the client's risk tolerance is crucial in determining suitable investments. This involves assessing how much risk the client is willing and able to take and considering the potential impact of changing market conditions on the client's investments.

Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. It is considered essential for reducing risk and achieving a more stable return over time.

Members and candidates may receive trade requests from clients that do not align with the investment policy. It is their responsibility to educate the client on how these requests deviate from the policy and to obtain client acknowledgment of the risks involved before proceeding.

For members and candidates managing funds to a specific index or mandate, it is crucial to ensure that investments are consistent with the stated objectives of the fund. They are not responsible for assessing the suitability of the fund for individual investors.

An IPS is a written document that outlines the client's investment objectives and constraints. It includes details such as client identification, investor objectives, investor constraints, and performance measurement benchmarks. This document serves as a guideline for making investment decisions that align with the client's goals and circumstances.

The IPS should be reviewed and updated regularly to ensure it remains relevant to the client's current financial situation and market conditions. This may involve adjusting the asset allocation based on changes in client circumstances or capital market expectations. Regular reviews, typically annually, are recommended unless specific events warrant more frequent updates.

With regulatory requirements for suitability tests increasing, firms are encouraged to develop policies and procedures that ensure investments are suitable for clients. These tests should consider factors beyond potential returns, such as the impact on portfolio diversification, alignment with the client's risk tolerance, and the overall investment strategy.

Investment suitability must be tailored to individual client's risk tolerance and financial circumstances. For example, recommending high-risk investments to a client who seeks stability and has a low risk tolerance is inappropriate and violates Standard III(C).

Advisors must consider the impact of new investments on the entire portfolio, ensuring that recommendations align with the overall investment strategy and client's risk profile.

Changes in a client's financial situation or objectives necessitate updates to the IPS to reflect new circumstances and ensure continued suitability of the investment strategy.

Investment actions must adhere to the stated fund mandate or IPS. Deviations from the mandate without proper adjustments or disclosures can lead to violations of Standard III(C).

Investment decisions should respect the constraints and requirements outlined in the IPS. Engaging in investments that do not meet these criteria, such as illiquid investments when liquidity is a requirement, is a breach of the standard.

When outsourcing to submanagers, due diligence is required to ensure their strategies align with clients' IPSs. Decisions should not be based solely on cost but should consider suitability and alignment with client needs.

Members and candidates must ensure that the performance information they provide is not only accurate but also credible, avoiding any misrepresentations or misleading data about past or expected performance.

This concept involves the complete and thorough disclosure of all relevant performance data to clients and prospective clients, ensuring that all communicated performance information is fair and comprehensive.

Compliance with the Global Investment Performance Standards (GIPS) is recommended as the best method to meet obligations under Standard III(D), ensuring standardized and ethical performance reporting.

These requirements include considering the audience's sophistication, using weighted composites of similar portfolios, including terminated accounts in the performance history, and providing necessary disclosures such as whether results are gross or net of fees.

Global Investment Performance Standards (GIPS) are ethical standards for calculating and presenting investment performance. Compliance with GIPS ensures fair representation and full disclosure of investment performance results.

When presenting performance data, it should be done in a manner that is fair, accurate, and complete. If using brief presentations, detailed supporting information should be available upon request.

Members can comply with Standard III(D) without applying GIPS by tailoring the presentation to the audience's sophistication, using weighted composites of similar portfolios, including terminated accounts, providing necessary disclosures, and maintaining accurate performance records.

Members and candidates claiming GIPS compliance must adhere to all its requirements, including asset-weighted performance calculations and mandatory disclosures.

When presenting past performance, especially from previous employment, it is crucial to disclose the source and context of the performance data to avoid misleading clients.

If simulated or model-based results are used in performance presentations, these must be clearly identified as such to ensure that the information presented is not misleading.

Performance calculations should include all relevant accounts to avoid selective reporting that could mislead potential clients about the overall performance.

The methodology used for performance calculation should be consistent and clearly disclosed to clients. Any changes to the methodology should also be disclosed along with the rationale for such changes.

Confidentiality must be maintained for all current, former, and prospective clients unless explicitly authorized by the client to disclose specific information.

Members and candidates must adhere to applicable laws that might mandate or restrict the disclosure of client information, even if it concerns illegal activities.

Members and candidates must be vigilant about potential accidental disclosures of client information due to the increasing use of electronic storage and communication, adhering to strict employer policies and data security laws.

Cooperation with the CFA Institute's Professional Conduct Program investigations is encouraged and does not violate confidentiality standards, provided it complies with applicable laws.

Members and candidates must adhere to applicable laws concerning client information, whether it mandates disclosure or requires confidentiality, even in cases involving illegal activities by the client.

Due to the high volume of electronically stored information, members and candidates must be vigilant about accidental disclosures and adhere to strict employer policies regarding the communication and storage of sensitive client information.

Standard III(E) allows members and candidates to cooperate with CFA Institute's Professional Conduct Program investigations without being considered in violation of confidentiality standards, provided it is permissible under applicable law.

Members and candidates should use firm-supported communication methods and compliance procedures that are designed to prevent accidental distribution of confidential information and regularly review privacy protection measures due to rapid technological changes.

Financial professionals must safeguard confidential information provided by clients for specific purposes, such as investment advice, and must not disclose this information to others without explicit permission or legal obligation.

Revealing confidential client information without consent, even with good intentions (such as charity), violates Standard III(E). Professionals must always protect client confidentiality unless required by law to disclose.

When encountering potentially illegal activities, professionals should first consult with legal or compliance departments. Disclosure of confidential information may be warranted if it involves preventing or reporting illegal activities, but should be handled carefully and legally.

Professionals must take reasonable steps to prevent accidental disclosure of confidential information. This includes advising clients on the risks of certain communication methods and promptly addressing any breaches that occur.

Members and candidates must act for the benefit of their employer, protect confidential information, and avoid actions that could harm their employer's interests.

While still employed, members and candidates must notify their employer and obtain consent before engaging in any independent practice that could compete with the employer's interests.

Members and candidates must continue to act in their employer's best interest until their resignation is effective, avoiding conflicts and protecting confidential information.

Members and candidates must adhere to employer policies regarding social media use, especially when it involves client interactions and when planning to leave the employer.

In cases of illegal or unethical activities by the employer, members and candidates may need to act contrary to their employer's interests to protect the integrity of the market and client interests.

The relationship type (employee or independent contractor) affects the applicability of Standard IV(A), determined by factors like control over work conditions and employment terms.

Members and candidates must be aware of any restrictions regarding offering similar services outside their current firm. This includes understanding noncompete agreements and the procedures for requesting approval to undertake outside services.

It is crucial for members and candidates to understand their employer's termination policies, which should cover the resignation process, client and staff disclosure, social media updates, and the transfer of responsibilities.

Members and candidates should be familiar with their firm's whistleblowing policies and encourage the adoption of industry best practices for confidential and anonymous reporting of unethical or illegal activities.

Understanding how policies apply to different employee classes (e.g., part-time, full-time, contractor) is essential for members and candidates. Firms should have a clear classification structure that indicates the applicability of various policies.

Employees must avoid soliciting former clients using proprietary information from their previous employer. Actions should comply with any non-compete agreements and respect the confidentiality of client information.

Employees must not take confidential information such as client lists, documents, or proprietary models from their employer without permission. This includes both physical and electronic records.

Employees planning to leave their current employer must avoid engaging in activities that directly compete with their employer's interests, such as responding to RFPs or starting a competing business, without explicit permission.

Employees who discover unethical practices within their organization should follow internal whistleblowing policies to report these issues, ensuring they act in the best interest of the firm and its clients.

Employees must respect the ownership rights of work products created during their employment. Even if they participated in the creation, the output belongs to the employer unless otherwise agreed.

Written consent for accepting additional compensation or benefits must be obtained from the employer. This consent can be in any form that is documentable, including emails.

Members and candidates must disclose any additional compensation they propose to receive. This disclosure should include the nature, amount, and duration of the compensation.

Accepting additional compensation without employer's consent may lead to a conflict of interest, affecting the member's or candidate's objectivity and loyalty to the employer.

For part-time employees, it is crucial to discuss potential competitive services during the hiring process to identify any limitations that might require employer's consent under Standard IV(B).

Members and candidates must provide a written report to their supervisor and compliance officer detailing any additional compensation they propose to receive. This report should include the nature, amount, and duration of the compensation.

The details of the additional compensation must be confirmed by the party offering it. This ensures transparency and verification of the terms discussed.

Members and candidates must disclose any non-monetary benefits that could influence their professional decisions, such as privileges, gifts, or other perks, to avoid potential conflicts of interest.

After disclosing the additional compensation, members and candidates must obtain consent from their employer to accept such compensation. This step is crucial to maintain integrity and avoid partiality in professional duties.

Members and candidates must immediately report in writing any additional compensation they propose to receive. This includes the nature, amount, and duration of the compensation.

Geoff Whitman failed to report a contingent compensation arrangement offered by a client, which could have led to partiality in managing the client's account. This is a violation of Standard IV(B).

Terry Jones did not disclose non-monetary benefits received from serving on a board, which could create a conflict of interest. This non-disclosure is a violation of Standard IV(B).

Jonathan Hollis followed the correct procedure by obtaining approval before engaging in activities that could be seen as a conflict of interest, thus adhering to Standard IV(B).

Supervisors must understand what constitutes an adequate compliance system for their firms, ensuring that appropriate compliance procedures are established, documented, communicated, and followed. These procedures should meet industry standards and regulatory requirements.

Supervisors must make reasonable efforts to detect violations of laws, rules, regulations, firm policies, and the Code and Standards. This involves establishing written compliance procedures, implementing them, and conducting periodic reviews to ensure adherence.

Members and candidates are encouraged to recommend that their employers adopt a code of ethics and compliance procedures. These codes are crucial for establishing a strong ethical foundation and for guiding the behavior of employees within investment advisory firms.

Codes of ethics establish fundamental ethical principles applicable to all employees, emphasizing client loyalty and integrity. Compliance procedures are detailed policies that ensure adherence to these codes and legal standards, helping to prevent misconduct.

These procedures should be clearly written, easily understandable, and tailored to the firm's operations. They should include a designated compliance officer, a clear hierarchy of supervision, checks and balances, and mechanisms for reporting violations.

Regular training programs are essential to reinforce the firm's code of ethics and help employees recognize and avoid ethical and legal pitfalls. These programs link ethical behavior to the long-term success of the business and emphasize a culture of integrity.

The incentive structure within a firm should align with ethical behavior and client interests. It should discourage unethical practices by not solely focusing on profits but also on how outcomes are achieved, promoting a culture of integrity.

Supervisors must ensure that there are effective controls and procedures to prevent misconduct and protect client interests. This includes preventing unauthorized dissemination of information and ensuring all trading and research activities are conducted ethically and legally.

Organizations must have documented and communicated procedures that are designed to prevent violations of ethical and professional standards. This includes procedures for reviewing research reports, trading activities, and ensuring compliance with all regulatory requirements.

Failing to provide adequate supervision can lead to unethical practices, such as insider trading or manipulation of market prices. This not only harms the clients but also undermines the integrity of the financial markets and the reputation of the supervising individual and the firm.

Members and candidates must exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions. They must have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action.

When relying on secondary or third-party research, members and candidates must make reasonable and diligent efforts to determine whether such research is sound. They should verify the source and accuracy of all data used in their investment analysis and recommendations.

Members and candidates need to understand the parameters, assumptions, and limitations of quantitatively oriented research models and processes. They should ensure that their analyses incorporate a broad range of assumptions sufficient to capture the underlying characteristics of investments.

When selecting external advisers or subadvisers, members and candidates must review managers as diligently as they review individual funds and securities. They need to ensure that their firms have standardized criteria for reviewing these selected external advisers and managers.

In group research settings, the conclusions or recommendations represent the consensus of the group and are not necessarily the views of the individual member or candidate. If the consensus opinion has a reasonable and adequate basis and is independent and objective, the member or candidate need not decline to be identified with the report.

In a group setting, the consensus represents the collective opinion, which may not necessarily reflect individual views. Members or candidates should ensure the group's opinion has a reasonable basis and is independent before associating their names with the report.

Firms should have policies ensuring that research reports and investment recommendations are based on substantiated, reasonable, and adequate grounds. This involves appointing individuals or committees to review such items before they are circulated externally.

Firms should develop written guidance for analysts and review committees outlining the procedures to judge if a recommendation has a reasonable and adequate basis, including detailed scenario testing for computer-based models.

Firms should develop criteria to assess the quality of research, the adequacy of recommendations, and the accuracy of information over time. This may include compensation arrangements based on these criteria.

Policies should be established to regularly review external advisers and providers, assessing the quality and accuracy of the information provided and the adequacy of their collection practices.

Due diligence involves a comprehensive appraisal of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term more commonly applies to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition.

Developing a reasonable basis requires that investment professionals conduct a thorough analysis and gather sufficient information to justify their investment recommendations. This includes understanding the nature and risks of the investment, as well as the client's objectives and constraints.

Investment professionals must keep their clients informed about significant changes that could affect their investment decisions. This includes updating clients about material changes in the investment outlook or in the investment itself.

While it is acceptable to use third-party research, investment professionals must ensure that they conduct their own due diligence to confirm the accuracy and reliability of the research before making investment recommendations based on it.

When using quantitatively oriented models, investment professionals must understand the underlying assumptions, limitations, and potential risks associated with the models. They must ensure that the models are robust and have been tested under various conditions.

Members must disclose the nature of the services provided and the costs associated with these services to clients and prospective clients, enabling them to make informed decisions.

It is crucial for members to explain their investment process, including how they select securities and construct portfolios, and to promptly disclose any changes that might materially affect these processes.

Communication can occur through various mediums such as written reports, presentations, or digital communications. Members must ensure that all forms of communication are clear and accessible to all clients.

Members must clearly outline significant risks and limitations associated with their investment processes to clients, ensuring that clients are aware of potential impacts on their investments.

Reports should clearly present the analysis and conclusions, distinguishing between facts and opinions, and should be supported by adequate investigation and reference material.

It is essential to distinguish between factual information and opinions or projections in investment reports to prevent misinterpretations and ensure clarity.

The selection of relevant factors in research reports is an analytical skill, and the determination of whether a member has used reasonable judgment is based on a case-by-case review, not a fixed checklist.

Firms are encouraged to implement a rigorous methodology for reviewing research created for publication and dissemination to clients, ensuring accuracy and reliability of the information provided.

Members must maintain records of their research and be prepared to provide additional information about factors not included in reports. Disclosure of compensation arrangements, especially those that could influence investment decisions, is crucial to avoid conflicts of interest.

Examples provided illustrate violations of Standard V(B), such as non-disclosure of compensation arrangements that could influence investment decisions, highlighting the importance of transparency and ethical conduct in financial advising.

Investment professionals must clearly communicate any fees charged for their services, including how these fees are calculated and any changes to fee structures.

Professionals should disclose the methodologies and assumptions used in their investment processes. Any changes to these processes must also be communicated to clients.

Clients must be informed about significant changes in investment strategies or processes, such as changes in valuation models or investment mandates.

Investment professionals should disclose the risks and limitations associated with the investment strategies they employ, ensuring clients understand potential downsides.

Members and candidates must retain records that substantiate their research and reasons for actions or conclusions. This includes personal notes, press releases, computer-based model outputs and inputs, risk analyses, selection criteria for external advisers, and outside research reports.

With the rise of digital communication, members are required to retain records in new media formats such as emails, text messages, blog posts, and social media posts. This ensures that all relevant information used in analyses or communicated to clients is preserved, regardless of the format.

Records created during professional activities are generally the property of the firm. If a member or candidate changes employment, they cannot take these records without explicit consent from the previous employer. Any future use of past records at a new firm must be recreated from public sources or directly from the covered company.

Local regulations may impose specific record retention requirements. In the absence of such regulations, the CFA Institute recommends maintaining records for at least seven years to comply with Standard V(C).

With the rise of digital communication, members and candidates must ensure that all relevant information shared through new media (e.g., emails, social media posts) is retained, despite the lack of immediate policies from employers or regulators.

Records created during professional activities are owned by the firm. Employees cannot take these records when they leave a firm unless they have explicit permission. Any use of historical data at a new firm must be supported by newly created or publicly sourced records.

Local regulations may dictate specific record retention requirements. In the absence of such regulations, the CFA Institute recommends retaining records for at least seven years to comply with Standard V(C).

Maintaining accurate records is crucial to demonstrate compliance with investment strategies and client agreements, as shown in the example of Nikolas Lindstrom, who needed to prove that his investment allocations were in line with the agreed-upon benchmarks in the client's IPS.

Researchers like Malcolm Young must document all sources and information used in their reports to ensure transparency and accountability, safeguarding against potential violations of Standard V(C).

Records created during employment are the property of the firm, not the employee. Martin Blank's example illustrates the violation of Standard V(C) when he took proprietary records to a new employer without permission.

Members and candidates must avoid conflicts of interest or disclose them fully if unavoidable. This ensures that their independence and objectivity are not compromised, maintaining trust and integrity in their professional duties.

Disclosures must be prominent, delivered in plain language, and effectively communicate the relevant information. This includes updating disclosures when the nature of a conflict changes materially.

Conflicts must be disclosed to both employers and clients. This includes conflicts arising from personal stock ownership, relationships with companies, or external positions such as board memberships that might influence professional judgment.

Conflicts can arise from various departmental interactions within a firm or from personal or direct stock ownership in advised companies. These conflicts must be managed or disclosed according to Standard VI(A).

Serving as a board member or director can create conflicts between duties to clients and duties to the company. Such positions may also provide access to material nonpublic information, requiring careful management and disclosure.

When a firm or its employees have a special relationship with a company they are reporting on, this relationship must be disclosed to maintain transparency and objectivity.

Ownership interests in a company by a firm or its employees can create conflicts of interest when making investment recommendations. Disclosure of these interests is essential, and best practice may require ceasing coverage of the company.

Personal ownership of stock in companies that an analyst covers can impair objectivity. Disclosure to both the employer and in any reports is necessary, and reassignment of the coverage to another analyst is recommended.

Compensation arrangements that incentivize behavior contrary to client interests, such as rewarding short-term performance when managing long-term investments, must be disclosed to clients.

Personal relationships that might influence business decisions, such as selecting external managers for investments, should be disclosed to allow employers to assess the potential conflict.

Investment transactions for clients and employers must take precedence over personal transactions to prevent conflicts of interest and ensure that client interests are served first.

Conflicts of interest should be avoided by ensuring that personal trading does not disadvantage clients, benefit the professional from client trades, or violate regulatory requirements.

Personal transactions should not adversely affect client investments and should be conducted only after clients and employers have had the opportunity to act on recommendations.

Members and candidates must not use nonpublic information for personal gain or convey this information to others who could use it for securities trading.

Transactions in accounts where the member or candidate has a beneficial ownership must be secondary to client transactions, and family accounts should be treated equitably without special treatment.

Firms should establish clear policies and procedures to manage conflicts of interest in personal transactions, including restrictions on participation in IPOs and private placements.

Investment personnel are advised against participating in IPOs to avoid conflicts of interest, such as taking away investment opportunities from clients or appearing to receive favorable treatment from issuers.

Strict limits should be placed on investment personnel acquiring securities in private placements to prevent conflicts of interest that may arise from receiving special opportunities as incentives.

Blackout periods should be established to prevent investment personnel from using insider knowledge to trade ahead of client transactions, a practice known as 'front-running'.

Investment personnel must disclose personal holdings and trade confirmations to their firms. Preclearance of trades is required to identify and manage potential conflicts of interest.

Firms must fully disclose their personal trading policies to investors, ensuring transparency and addressing public concerns about potential conflicts of interest.

Members and candidates must fully disclose their firm's policies on personal investing to investors to ensure transparency and address public concerns about potential conflicts of interest.

Investment professionals must place client transactions ahead of personal or family transactions to avoid conflicts of interest and ensure fair treatment of all clients.

Managing family accounts requires that they be treated equally to other client accounts, without any preferential treatment, unless disclosed and in compliance with firm policies.

Investment professionals must disclose their trading activities, especially when trading could potentially conflict with client interests or firm policies.

Professionals must avoid using nonpublic or insider information for personal gain or before it is available to clients, to maintain market integrity and comply with ethical standards.

Members and candidates must disclose any compensation or benefits they receive or pay for referrals, ensuring transparency in their professional relationships and allowing clients and employers to assess potential conflicts of interest and overall service costs.

The disclosure must include the nature of the consideration (e.g., flat fee, percentage basis) and its estimated dollar value. This helps in providing a clear and comprehensive understanding of the benefits involved.

Members and candidates should encourage their employers to establish clear procedures regarding referral fees, which may include restrictions or detailed approval processes, to maintain ethical standards within the firm.

Investment professionals are advised to provide regular updates to their employers about the nature and amount of referral compensation received, promoting ongoing transparency and adherence to ethical standards.

Members and candidates are required to disclose any compensation, consideration, or benefit they receive or pay for recommending products or services. This disclosure helps clients and employers assess the impartiality and total cost of the services recommended.

The disclosure must include the nature of the consideration (e.g., flat fee, percentage basis) and its estimated dollar value. This includes all forms of fees, whether paid in cash, in soft dollars, or in kind.

Firms are encouraged to develop procedures related to referral fees, which may include restrictions or guidelines for approval. Regular updates on the nature and amount of compensation received should be provided to the employer.

Examples provided illustrate violations of Standard VI(C), such as failing to disclose referral arrangements or internal referral payments. These examples emphasize the importance of full disclosure to maintain professional integrity and client trust.

Financial professionals must disclose any referral arrangements that might influence their recommendations. This includes both external and internal referral payments, ensuring that clients can make informed decisions about the services they are receiving.

It is crucial for professionals to inform both their employers and their clients about any referral arrangements or conflicts of interest that could impact their professional duties or influence their decision-making process.

Professionals must also adhere to local regulations concerning referral arrangements and conflicts of interest, which may include registering with a regulatory agency's ethics board and reporting contributions to political organizations.

CFA Institute strictly prohibits the disclosure of confidential material related to its programs and exams. This includes specific exam questions, broad topical areas, and formulas tested or not tested, ensuring the integrity and rigor of exams for future candidates.

Candidates must adhere to specific rules and regulations during exams, such as the calculator policy and personal belongings policy. Violations of these policies constitute a breach of Standard VII(A).

While members and candidates can express opinions about CFA Institute policies or procedures, they must not disclose exam-specific content or subject matter covered in the exams when doing so.

Providing or receiving information about exam questions before or after the exam compromises the integrity and fairness of the exam, violating Standard VII(A).

Entering the exam room with unauthorized written material, such as formulas, is a direct violation of Standard VII(A) as it undermines the validity of the exam performance.

Continuing to write after the exam has officially ended provides an unfair advantage and compromises the exam's integrity, violating Standard VII(A).

Discussing or posting exam content publicly can assist future candidates unfairly and compromise the confidentiality of the exam content, violating Standard VII(A).

Using a volunteer position for personal or client gain, or sharing confidential information gained through such positions, compromises the reputation and integrity of the CFA Institute, violating Standard VII(A).

Misuse of the CFA designation or candidacy occurs when individuals inaccurately represent their CFA status or imply superior abilities based on their CFA achievements. This includes linking passing exams on the first attempt to superior investment performance or claiming a partial designation.

Proper references to the CFA designation should accurately reflect one's status without suggesting superiority or guaranteed outcomes. Examples include stating factual achievements like passing exams or enrolling in the CFA Program without implying enhanced abilities or outcomes.

Firms are encouraged to develop templates for referencing CFA status that are approved by a central authority like the compliance department. This ensures consistency and accuracy in how CFA status is communicated, reducing the risk of misrepresentation.

If a CFA charterholder lapses in their professional conduct or dues, they must cease using the CFA designation until they have reinstated their membership by fulfilling all necessary requirements, including filing a Professional Conduct Statement and paying dues.

Members must maintain active membership, which includes filing a Professional Conduct Statement and paying dues, to use the CFA designation. Failure to do so results in suspension of the right to use the designation.

It is inappropriate to link passing CFA exams or holding the CFA designation directly to superior investment performance or abilities.

Firms should use templates approved by a central authority like the compliance department to ensure consistency and accuracy when referencing CFA Institute membership or designation.

The order of citing professional and academic designations on business cards or resumes is a matter of personal preference, but they must be separated by commas.

Using a fictitious name in conjunction with the CFA designation is inappropriate. Authorship of any publication or online content that includes the CFA designation must clearly state the full name of the charterholder.