Ethics

Question 1

Know the law relevant to your position

Answer 1

• Comply with most strict law that applies
• Do not solicit gifts
• Do not compromise objectivity/independence
• Use reasonable care
• Do not lie/cheat/steal
• Do not associate with others breaking rules
• Do not use other’s work/idea without attribution
• Do not guarantee investment results or say past results will be repeated
• Do not do things outside of work reflecting poorly on integrity/professional competence

Question 2

Do not act or cause others to act on material nonpublic information

Answer 2

• Do not manipulate market prices or trading volume with the intent to mislead others

Question 3

Act solely for client benefit & know to whom a fiduciary duty is owed in regards to trust & retirement accounts

Answer 3

• Treat clients fairly by attempting simultaneous dissemination of investment recommendations & changes
• Do not personally take shares in oversubscribed IPOs

Question 4

When in an advisory relationship

Answer 4

• Know your client
• Make suitable recommendations/take action (in a total portfolio context)
• Preserve confidential client info (unless illegal)
• Do not try to mislead with performance presentation
• Vote nontrivial proxies in clients’ best interest

Question 5

Act for the benefit of your employer

Answer 5

• Do not harm your employer
• Obtain written permission to compete with your employer or to accept additional compensation from clients contingent on future performance
• Disclose any client gifts to employer
• Do not take material with you when you leave employment
• Supervisors must take action to prevent & detect violations
• Do not take supervisory responsibility if you believe procedures are inadequate

Question 6

Thoroughly analyze investments

Answer 6

• Have a reasonable basis
• Keep records
• Tell clients about investment process
• Distinguish between facts & options

Question 7

Disclose potential conflicts of interest

Answer 7

• Disclose referral arrangements
• Client transactions come before employer which come before personal
• Treat family member clients like any other client

Question 8

What can you do?

Answer 8

• Use information from recognized statistical sources without attribution
• Be wrong
• Use several pieces of non-material, nonpublic information to construct investment recommendations (mosaic theory)
• Execute large trades that may affect market prices as long as the intent of the trade is not to simply mislead
• Say the Treasury securities are without default risk
• Seek guidance from CCO, GC, or supervisor
• Get rid of records after 7 years
• Accept gifts from clients & referral fees if properly disclosed
• Call your biggest clients first
• Accept compensation from a company to write a research report if you disclose the relationship/nature of compensation
• Get drunk not at work!