Dear CFA Level I Candidate, this is the last few days before the exam and we are nearing the end of the series. We will be covering CFA Program Ethics today, here are some tips that you need to keep in mind while tackling the CFA Program Ethics sections –
- Always remember, in cases where more than one country’s laws and the CFA Program standards apply, you must follow the strictest law.
- Participation in IPO is another confusing area in ethics. Please remember CFA Program Institute doesn’t prohibit portfolio managers or anyone else from participating in IPOs as long as pro-rata allocation is ensured for all clients by some pre-determined logic. At the same time, one needs to be mindful of any country specific rule which may prohibit participation in IPOs, in that case stricter rule will follow.
- You must remember that trading based on ONLY Material Non-Public information is NOT allowed. Seeing the senior management of two companies that might be candidates for a merger together having dinner at a restaurant is non-material. Trading based on that information IS allowed.
- You can NEVER take any client information or any financial models or documents you made, once you resign from a company. You cannot take a client’s non-public contact information. However, you can use the knowledge and skills you have developed in the next job.
- Remember, using third party research to base investment decisions is allowed under standard V (A) Diligence and Reasonable Basis. However, the analyst MUST first analyze (i) the underlying assumptions (ii) understand how rigorous the analysis is (iii) Identify the timeliness of the report (iv) the independence and objectivity of the research recommendation. If these are not mentioned, that means it is a violation of this standard.
- Violations related to plagiarism are under standard I C) Professionalism – Misrepresentation. Often people confuse it with II Integrity of Capital Markets or IV Investment Analysis, Recommendations & Actions.
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