suitability standard
Suitability refers to the match between client return requirements and risk tolerances and the characteristics of the securities recommended.
fiduciary standard
A fiduciary standard requires professionals to use their knowledge and expertise to act in the best interests of the client.
ethical decision-making framework
- Identify: Relevant facts, stakeholders and duties owed, ethical principles, conflicts of interest.
- Consider: Situational influences, additional guidance, alternative actions.
- Decide and act.
- Reflect: Was the outcome as anticipated? Why or why not?
Code of Ethics
- Act with integrity, competence, diligence, respect, and in an ethical manner
- 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 activities
- Practice and encourage others to practice in a professional and ethical manner.
- Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
- Maintain and improve their professional competence.
The Standards of Professional Conduct
PIDDICR
- Professionalism
- Integrity of Capital Markets
- Duties to Clients
- Duties to Employers
- Investment Analysis, Recommendations, and Actions
- Conflicts of Interest
- Responsibilities as a CFA Institute Member or CFA Candidate
Sanctions that CFA Institute may impose on a member or candidate under the Professional Conduct Program include:
- public censure
- suspension from membership and use of the CFA designation
- revocation of the CFA charter
- suspension of a candidate’s participation in the CFA program.
a professional
- specialised knowledge
- provides service to others
- common code of ethics
Challenges to ethical behaviour
- overconfidence in own morality
- situational influences
- focusing on short-term outcomes, not long-term outcomes
Disadvantage of using a compliance approach to decision making?
Can oversimplify the decision making process and discourage decision makers from seeing the bigger picture
Mosaic Theory
caveat for Standard II (A): Integrity of Capital Markets - Material Non-public information
combining non-material, non-public information with public information to reach a conclusion (allowed)
