Course Content
ETHICS AND TRUST IN THE INVESTMENT PROFESSION
This chapter is covered in Reading 1 of the Study Session 1, of the study material prescribed by the institute. After reading this chapter a student should be able to: a explain ethics; b describe the role of a code of ethics in defining a profession; c describe professions and how they establish trust; d describe the need for high ethical standards in investment management; e explain professionalism in investment management; f identify challenges to ethical behavior; g distinguish between ethical and legal standards; h describe a framework for ethical decision making.
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LOS A: Explain Ethics
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LOS B: Ethics and Professionalism
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LOS C: How Professions Establish Trust
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LOS D and E: Professionalism in Investment Management
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LOS F: Challenges to Ethical Conduct
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LOS G: Ethical and Legal Standards
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LOS H: Framework for Ethical Decision Making
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CODE OF ETHICS AND STANDARDS OF PROFESSIONAL CONDUCT
This chapter is covered in Reading 2 of the Study Session 1, of the study material prescribed by the institute. After reading this chapter a student should be able to: a. describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards; b. state the six components of the Code of Ethics and the seven Standards of Professional Conduct; c. explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard.
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LOS A: Professional Conduct Program
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LOS B: Code of Ethics
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LOS C: Code and Standards
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GUIDANCE FOR STANDARDS I–VII
This chapter is covered in Reading 3 of the Study Session 1, of the study material prescribed by the institute. After reading this chapter a student should be able to: a. demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity; b. distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards; c. recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct.
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Professionalism – First standard of Professional Conduct
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Integrity of Capital Markets – Second Standard of Professional Conduct
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Duties to Clients – Third Standard of Professional Conduct
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Duties to Employer – Fourth Standard of Professional Conduct
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Investment Analysis, Recommendations, & Actions
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Conflict of Interest
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Responsibility as a CFA Institute Member or CFA Candidate
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INTRODUCTION TO THE GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS)
This chapter is covered in Reading 4 of the Study Session 1, of the study material prescribed by the institute. After reading this chapter a student should be able to: a. a explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards; b. explain the construction and purpose of composites in performance reporting; c. explain the requirements for verification.
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Why Were GIPS Standards Created?
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Who Can Claim Compliance?
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Who Benefits from Compliance?
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Composites
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Verification
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GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS)
This chapter is covered in Reading 5 of the Study Session 1, of the study material prescribed by the institute. After reading this chapter a student should be able to: a. describe the key features of the GIPS standards and the fundamentals of compliance; b. describe the scope of the GIPS standards with respect to an investment firm’s definition and historical performance record; c. explain how the GIPS standards are implemented in countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulations conflict; d. describe the nine major sections of the GIPS standards.
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Objectives of GIPS
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Overview of GIPS Standards
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Compliance with GIPS
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Recommendations
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Scope of GIPS Standards
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Implementation
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Major Section of GIPS Standards
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Ethical and Professional Standards
About Lesson

For any profession, establishing trust with the clients and society is of prime importance. Building trust is not just a one-time event, it requires a persistent effort. To establish the trust, the profession must:

1. Professions normalize practitioner behavior

There are professional bodies constantly working towards developing standards for ethical practice and regulate the professionals. These are the bodies that establish a profession. They also ensure the adherence to these standards by the members of the profession.

2. Professions provide a service to society

a. There should be a focus on higher educational and ethical standards in the industry.

b.  They must establish trust in the industry they serve.

c.  Better trust ensures fewer government regulations.

d.  This ensures better services to the clients, thus increasing the economic benefits too.

3. Professions are client-focused

a.  Each profession is regulated by ethical standards that ensure professional integrity. It also makes sure that the interests of clients above their own personal interests.

b.  These standards require exercising a reasonable level of care, skill, and diligence in performing the fiduciary duty.

c.  The employers also insist on employing the people who are members of professional bodies to ensure better services to clients.

4. Professions have high entry standards

Professions develop curricula that equip future professionals with competence, including technical skills, knowledge, and ethics.

5. Professions possess a body of expert knowledge

The curriculum for professionals is developed by skilled and experienced professionals to ensure the best professionals are available.

6. Professions encourage and facilitate continuing education

a.  Obtaining education, skills, and a charter or degree is not just a one-time thing or the end of the road.

b.  Professional bodies insist on regularly updating their members with technical skills and ethics.

c.  This ensures better competencies and continuing professional development.

d.  This also increases the value of human capital that contributes to economic growth.

7. Professions monitor professional to conduct

a.  The members of a professional body are accountable for their integrity and reputation in the industry.

b.  These bodies regularly monitor the members and impose sanctions on them.

8.  Professions are collegial

a.  Professionals are expected to be respectful to each other, even if they are competitors.

b.  The rights, dignity, and autonomy of other members must be respected.

9. Professions are recognized oversight bodies

a.  An oversight body generally ensures that its members remain competent. 

b.  They provide resources, continue to make sure that its members are technically skilled and disciplined.

c.  Continuing membership to the professional body ensures the member’s compliance to the code of ethical conduct.

10. Professions encourage the engagement of members

a.  Professions to encourage their members to volunteer in the development of the profession, skill development and training of new members, and engagement with other members of their profession.

b.  This enhances their skills and widens their contacts within the industry.

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