Cfa Reading 2

Front 1

I. A.

Back 1

I. PROFESSIONALISM
A. Knowledge of the Law. Members and candidates must understand and
comply with all applicable laws, rules, and regulations (including the
CFA Institute Code of Ethics and Standards of Professional Conduct) of
any government, regulatory organization, licensing agency, or professional
association governing their professional activities. In the event of
conflict, members and candidates must comply with the more strict law,
rule, or regulation. Members and candidates must not knowingly participate
or assist in and must dissociate from any violation of such laws,
rules, or regulations.

Front 2

I. B.

Back 2

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.

Front 3

I. C.

Back 3

I. PROFESSIONALISM
C. Misrepresentation. Members and candidates must not knowingly make
any misrepresentations relating to investment analysis, recommendations,
actions, or other professional activities.

Front 4

I. D.

Back 4

I. PROFESSIONALISM
D. Misconduct. Members and candidates must not engage in any professional
conduct involving dishonesty, fraud, or deceit or commit any act
that reflects adversely on their professional reputation, integrity, or
competence.

Front 5

II. A.

Back 5

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.

Front 6

II. B.

Back 6

INTEGRITY OF CAPITAL MARKETS
Market Manipulation. Members and candidates must not engage in
practices that distort prices or artificially inflate trading volume with the
intent to mislead market participants.

Front 7

III. A.

Back 7

III. DUTIES TO CLIENTS
A. Loyalty, Prudence, and Care. Members and candidates have a duty of
loyalty to their clients and must act with reasonable care and exercise
prudent judgment. Members and candidates must act for the benefit of
their clients and place their clients’ interests before their employer’s or
their own interests. In relationships with clients, members and candidates
must determine applicable fiduciary duty and must comply with
such duty to persons and interests to whom it is owed.

Front 8

III. B.

Back 8

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.

Front 9

III.C.1.A.

Back 9

III. DUTIES TO CLIENTS
C. Suitability.
1. When members and candidates are in an advisory relationship with a
client, they must:
a. Make a reasonable inquiry into a client’s or prospective client’s
investment experience, risk and return objectives, and financial
constraints prior to making any investment recommendation or
taking investment action and must reassess and update this information
regularly.

Front 10

III.C.1.B.

Back 10

III. DUTIES TO CLIENTS
C. Suitability.
1. When members and candidates are in an advisory relationship with a
client, they must:
b. Determine that an investment is suitable to the client’s financial situation
and consistent with the client’s written objectives, mandates,
and constraints before making an investment recommendation or
taking investment action.

Front 11

III.C.1.C.

Back 11

III. DUTIES TO CLIENTS
C. Suitability.
1. When members and candidates are in an advisory relationship with a
client, they must:
c. Judge the suitability of investments in the context of the client’s
total portfolio.

Front 12

III.C.2.

Back 12

III. DUTIES TO CLIENTS
C. Suitability.
2. When members and candidates are responsible for managing a portfolio
to a specific mandate, strategy, or style, they must only make investment
recommendations or take investment actions that are
consistent with the stated objectives and constraints of the portfolio.

Front 13

III.D.

Back 13

III. DUTIES TO CLIENTS
D. Performance Presentation. When communicating investment performance
information, members or candidates must make reasonable efforts
to ensure that it is fair, accurate, and complete.

Front 14

III.E.

Back 14

III. DUTIES TO CLIENTS
E. Preservation of Confidentiality. Members and candidates must keep
information about current, former, and prospective clients confidential
unless:
1. The information concerns illegal activities on the part of the client or
prospective client,
2. Disclosure is required by law, or
3. The client or prospective client permits disclosure of the information.

Front 15

IV.A.

Back 15

IV. DUTIES TO EMPLOYERS
A. Loyalty. In matters related to their employment, members and candidates
must act for the benefit of their employer and not deprive their
employer of the advantage of their skills and abilities, divulge confidential
information, or otherwise cause harm to their employer.

Front 16

IV.B.

Back 16

IV. DUTIES TO EMPLOYERS
B. Additional Compensation Arrangements. Members and candidates must
not accept gifts, benefits, compensation, or consideration that competes
with, or might reasonably be expected to create a conflict of interest
with, their employer’s interest unless they obtain written consent from all
parties involved.

Front 17

IV.C.

Back 17

IV. DUTIES TO EMPLOYERS
C. Responsibilities of Supervisors. Members and candidates must make
reasonable efforts to detect and prevent violations of applicable laws,
rules, regulations, and the Code and Standards by anyone subject to
their supervision or authority.

Front 18

V.A.1.

Back 18

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.

Front 19

V.A.2.

Back 19

V. INVESTMENT ANALYSIS, RECOMMENDATIONS, AND ACTIONS
A. Diligence and Reasonable Basis. Members and candidates must:
2. Have a reasonable and adequate basis, supported by appropriate
research and investigation, for any investment analysis, recommendation,
or action.

Front 20

V.B.1.

Back 20

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 used to analyze investments,
select securities, and construct portfolios and must promptly
disclose any changes that might materially affect those processes.

Front 21

V.B.2.

Back 21

V. INVESTMENT ANALYSIS, RECOMMENDATIONS, AND ACTIONS
B. Communication with Clients and Prospective Clients. Members and candidates
must:
2. Use reasonable judgment in identifying which factors are important
to their investment analyses, recommendations, or actions andinclude those factors in communications with clients and prospective
clients.

Front 22

V.B.3.

Back 22

V. INVESTMENT ANALYSIS, RECOMMENDATIONS, AND ACTIONS
B. Communication with Clients and Prospective Clients. Members and candidates
must:
3. Distinguish between fact and opinion in the presentation of investment
analysis and recommendations.

Front 23

V.C.

Back 23

V. INVESTMENT ANALYSIS, RECOMMENDATIONS, AND ACTIONS
C. Record Retention. Members and candidates must develop and maintain
appropriate records to support their investment analysis, recommendations,
actions, and other investment-related communications with clients
and prospective clients.

Front 24

VI. A.

Back 24

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.

Front 25

VI.B.

Back 25

VI. CONFLICTS OF INTEREST
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.

Front 26

VI.C.

Back 26

VI. CONFLICTS OF INTEREST
C. Referral Fees. Members and candidates must disclose to their employer,
clients, and prospective clients, as appropriate, any compensation, consideration,
or benefit received from, or paid to, others for the recommendation
of products or services.

Front 27

VII.A.

Back 27

VII. RESPONSIBILITIES AS A CFA INSTITUTE MEMBER
OR CFA CANDIDATE
A. Conduct as Members and Candidates in the CFA Program. Members
and candidates must not engage in any conduct that compromises the
reputation or integrity of CFA Institute or the CFA designation or the
integrity, validity, or security of the CFA examinations.

Front 28

VII.B.

Back 28

VII. RESPONSIBILITIES AS A CFA INSTITUTE MEMBER
OR CFA CANDIDATE
B. Reference to CFA Institute, the CFA Designation, and the CFA Program.
When referring to CFA Institute, CFA Institute membership, the CFA
designation, or candidacy in the CFA Program, members and candidates
must not misrepresent or exaggerate the meaning or implications of
membership in CFA Institute, holding the CFA designation, or candidacy
in the CFA program.

Front 29

The Code of Ethics

Back 29

 Act with integrity, competence, diligence, respect, and in an ethical manner
with the public, clients, prospective clients, employers, employees,
colleagues in the investment profession, and other participants in the
global capital markets.
 Place the integrity of the investment profession and the interests of clients
above their own personal interests.
 Use reasonable care and exercise independent professional judgment when
conducting investment analysis, making investment recommendations,
taking investment actions, and engaging in other professional activities.
 Practice and encourage others to practice in a professional and ethical
manner that will reflect credit on themselves and the profession.
 Promote the integrity of, and uphold the rules governing, capital markets.
 Maintain and improve their professional competence and strive to maintain
and improve the competence of other investment professionals.