Each team in this course is required to select one of the following topics drawn from the standards and address the related questions and/or issues. The CFA Standards of Practice Handbook provides information as well as examples of applications that can be used to illustrate issues and best practices.
- Standard I: Professionalism
(B) Independence and Objectivity: Members and Candidates must use reasonable care and judgment to achieve
and maintain independence and objectivity in their professional activities.
Members and Candidates must not offer, solicit, or accept any gift, benefit,
compensation, or consideration that reasonably could be expected to compromise
their own or another’s independence and objectivity.
- Briefly describe the various sources of pressure on analysts, which may influence their opinions and jeopardize their independence.
- What are some best practices that finance professionals and their organizations can use to protect the objectivity of their analyses?
- Standard I: Professionalism
(C) Misrepresentation: Members and Candidates must not knowingly make any misrepresentations
relating to investment analysis, recommendations, actions, or other
professional activities.
- Why is omission of a fact or outcome increasingly important?
- Why is additional care required when using third-party information?
- The topic of plagiarism was covered in detail to fulfill the SARI requirements in an earlier MFIN course. CFA members and candidates are cautioned to avoid plagiarism in some common practices. What are these practices?
- What does the CFA Institute recommend to guard against unintended misrepresentation?
- Standard II: Integrity of Capital Markets
(A) Material Nonpublic Information: Members and Candidates who possess material nonpublic information that
could affect the value of an investment must not act or cause others to act on
the information.
- Define “material” and “nonpublic” information.
- Why is it perceived as critical that financial professionals and others with access to material, nonpublic information do not trade based on such information?
- What is the mosaic theory, and how do we distinguish this use of information from the inappropriate use of material, nonpublic information? Provide at least one example of each.
- List some of the recommendations for compliance or best practices for preventing misuse of material, nonpublic information.
- Standard III: Duties to Clients
(B) Fair Dealing: Members and Candidates must deal fairly and objectively with all clients
when providing investment analysis, making investment recommendations,
taking investment action, or engaging in other professional activities.
- Explain the concept of fair dealing as it relates to disseminating investment analysis and recommendations.
- Does “fair” mean that all clients must be treated in exactly the same manner?
- Describe appropriate standards of conduct that apply to 1) investment recommendations based on new or revised information, and 2) investment actions.
- Standard V: Investment Analysis, Recommendations, and Actions
(A) Diligence and Reasonable Basis: Members and Candidates must:
(1) Exercise diligence, independence, and thoroughness in analyzing investments,
making investment recommendations, and taking investment actions.
(2) Have a reasonable and adequate basis, supported by appropriate research
and investigation, for any investment analysis, recommendation, or action.
- Define “diligence” and “reasonable basis.”
- What attributes should be considered in forming a basis for making an investment recommendation?
- What criteria should be used in assessing the reliability of third party research?
- Given the increased use of quantitative models, what factors should be considered in evaluating the validity of these models?
- Standard V: Investment Analysis, Recommendations, and Actions
(B) Communication with Clients and Prospective Clients: Members and Candidates must:
(1) Disclose to clients and prospective clients the basic format and general
principles of the investment processes they use to analyze investments,
select securities, and construct portfolios and must promptly disclose any
changes that might materially affect those processes.
(2) Use reasonable judgment in identifying which factors are important to
their investment analyses, recommendations, or actions and include those
factors in communications with clients and prospective clients.
(3) Distinguish between fact and opinion in the presentation of investment
analyses and recommendations.
- Outline the guidance for effective and thorough communications with clients, whether individual or institutional. Briefly describe each of the guidelines and provide examples.
- Briefly explain the importance of identifying limitations of analysis.
- Distinguish between facts and opinions in reports. Provide examples of each.
- Standard VI: Conflicts of Interest
(A) Disclosure of Conflicts: Members and Candidates must make full and fair disclosure of all matters that
could reasonably be expected to impair their independence and objectivity or
interfere with respective duties to their clients, prospective clients, and
employer. Members and Candidates must ensure that such disclosures are
prominent, are delivered in plain language, and communicate the relevant
information effectively.
- Describe the nature of conflicts of interests related to employers. How should such conflicts be handled? What are the recommended practices in these cases?
- Describe the most common types of conflicts which may affect relationships with clients. What are the appropriate procedures in these cases?
(B) Priority of Transactions: Investment transactions for clients and employers must have priority over investment
transactions in which a Member or Candidate is the beneficial owner.
- An investment professional may profit from personal investments as long as what conditions apply?
- What is meant by the phrase “personal trading is secondary to trading for clients”?
- What is meant by “beneficial ownership” and how should such accounts be treated?