Professionalism

Knowledge of the law. Stricter law always apply.- applicable law- stricter law- knowingly partake/assist in violation- dissociation from any such violation

2. Ind & obj- gift could be considered supplementary compensation- disclose to employers such benefits- true opinion: free from bias- solicitations (direct/indirect): actual and perceived indmay accept modestly arranged travel to partake in apt information-gathering events.

3. misrep- prohibits members/candiddates from guaranteeing clients any specific return on volatile investments even if its based on historical perf but can state fact like govt treasury bonds return guaranteed by govt- care & diligence when using 3rd party managerconsistency in perf reportingdoesnt req benchmark to always be provided in order to comply- plagiarism & omissions- firm retains right to use work completed by prev EE

4. Misconduct- all conduct that reflects poorly on the professional integrity, good reputation/ competence of members/ candidates even outside of working hours

INTEGRITY OF CAPIAL MARKETS

1. material, non-public information- material : reliable, ambiguity, passage of time- non-public: until disseminated ( made known) to market- may use insider information provided legitimately by the source coy for specific purpose of conducting due diligence- mosaic theory: (1)public (2)nonmaterial non-public information

2. market manipulation- information-based manipulation analyst spreading false rumours about coy to instigate traders to act on false information to cause prices to jump- transaction-based manipulation pump & dump/ short sell/ manipulate prices

Duties prioritization : client, capital market, employer, you

Duties to client

1. Loyalty, prudence and care- fiduciary duty ( enhanced trust position): advisor/acting on behalf of clients. Fiduciary duty is only owed by an advisor, not a trader who executes trade and ensure price of trade/stock is cheapest thats all- actual clients : pension plan holders. Must know your clients. Always the beneficiaries. If you are managing passive index fund/etf no beneficiaries so need to follow IPS/mandate. - soft commission vs direct brokerageclientyou (manage)broker (trade)Broker earn from commission and broker sometimes give you research reports in returnsoft commission. Have to make sure that research reports from soft commission ultimately benefits clients. If you buy from them using actual cash, its direct brokerage. Referral fees both you (manager) and brokers have different clients. To get more clients, you may ask the broker to give you clients so that you give the broker referral fees. You can be the one receiving it as well. Soft comm is always only applied to research reports.- proxy voting ( shares owed by clients are in your custody/clients ask you to vote for these shares, must make sure you vote as they have values as well)2. Fair dealing - Fair does not mean equal: higher-fee paying cleints will be given more serviceYou can give premium services in return for higher fees but must make sure it doesnt disadvantage the lower-paying clients.Family members are clients: must treat them fairly as well, equally like other fee-paying clients.- Investment recommendation: disseminate to all clients even though some may be paying a premium fee ( when you issue research reports)- Investment action (when clients act on research reports): always prorated lot allocation to all clients (including family member clients). Must be round blocs cant have decimals3. Suitability- Advisor relationship: investor constraints, strategy, risk tolerance, objective (IPS) every client has unique needs to be met- Context of total portfolio: diversification. E.g. strong buy security but must see it in the context of total portfolio- Specific mandate: ensure consistency with policy. If an investment action that client wants not within iPS has significant impact, must make sure client understand IPS or get them to sign something. 4. Performance presentation- Fair, accurate, complete. Cannot cherry pick a portfolio that is doing better than others to present5. Preservation of confidentiality- Former, current, prospective clients (even after end of client relationship)- Exceptions: illegal activities, required by law, clients permit disclosure- Professional conduct program by CFA institute ( if suspected illegal activities) ( not a violation by forwarding info to PCP)

Duties to Employers

1. Loyalty Always place interest of clients above employer interests Undertake independent practice: engage in competitive business ( vs making preparations for such practice) Render such indp pract only when consent is given by ERS Leaving an ER (1) Skills & experience (2)Simple knowledge of client not confidential (3) Does not prohibit former EEs from contacting clients if means in which you obtain information in from the public and not from former ER (4) Work performed must be erased e.g. model you created in the firm cannot be claimed ownership by you. You can develop from scratch in a new company but not copy and paste. (5) Take of non-compete agreement. If you have signed such an agreement, cannot solicit business. 2. Additional Compensation Arrangements- Written consent from ERS- Disclosure req to evaluate true cost of service being to client & to evaluate action/intention3. Responsibility of supervisor - System of supervision: delegation of duties ( supervisor still responsible after delegation)- (1)Detect & prevent violation (2) Adequate policy (3) Monitor and enforcement (4) Report violation

Investment Advice, reporting, action1. Due diligence & reasonable basis- Can use 3rd party reports to substantiate only if they are properly cited2. Communication with clients & prospective clients- Disclose basic format and general principles of investment process- limitations and risks 3. Record retention- Property of the firm, must be retained for at least 7 years

Conflict Of interest1. Disclosure of conflicts- full and fair disclosure- (1)EEs, (2) Clients (3)Cross-dept (4)Stock ownership (5) Directorgenerally advised not to buy stocks if you are EE of coy since its about perception, public perception is that you will want to now issue fav reports for the coy to increase price of stocks.2. Priority of transactions- Personal trading is secondary to client- Impact on all accounts with beneficial ownership- Family client acct should neither be disadv / given preferential treatement3. Referral Fees- Disclosure compensation/benefit to ER and clients (Both vs only ER for additional compensation)- Advise client of any referral fees received- disclosure allows clients to assess partiality in service and determine full cost of service

Responsibility as CFA institute member/candidate- Candidate is either someone who is sitting for the exam/ waiting for results- Member:- CFA must be used as an adjective and cannot be applied to say holding CFA is superior to someone without. You can only say you have completed it.

GIPSEverytime you show return of portfolio, cannot always show transparently. To address misleading practices (1)Representative accts (2)Survivorship bias (3)Varying time periodsCompliance by: investment management firm (actually mged assets)Effective date: jan 1, 2011.Firms must include terminated composities on the firms list of composite descriptions not performance for at least 5 years after composite termination.Composiites: what is part of composite aggregation of 1/more portfolios managed according to similar investment mandate, objective or strategy, all actual fee-paying and discretionary portfolios ( manager has discretion to intervene), and what is part of total assets both fee and non fee paying and both discretionary and non discretionary?9 sections:Fundamentals of compliance: a gips compliant firm has to be fully compliant, no partial compliant, firm wide basis. No need to be verified by 3rd party but recommended to do so ( how you obtain composite and how you cal returns). Total assets: all discretionary and non-discretionary assets both fee and non fee payingInput dataCalculation methodologyComposite construction: all actual, fee paying discretionary portfolios, only actual assets managed by firms, terminated porfolios must be includedDisclosurePresentation and reportingReal estatePrivate equityWrap fees/separately managed accts portfolios