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CODE OF PROFESS IONAL ETH ICS AND STANDARDS OF PRACT ICE FOR

AR IZONA ASSOCIAT ION OF COMMUNITY MANAGERS

I. INTRODUCTION

AACM is dedicated to representing the interests of community association management companies throughout the State of Arizona by promoting the utmost professionalism in the industry. Membership in AACM requires that the Member Company and representatives thereof, Individual Member, or CAAM® Participant demonstrate the highest levels of honesty, integrity, and capability to their clients, other firms, service providers, and fellow Members of AACM. There are two categories of Membership in AACM: Management Company Memberships are for the business entity of a management company. Individuals within a Member management company are not eligible for AACM Membership, but may receive the educational and networking advantages of Membership through their employment with the Member management company. Individual Memberships are for those individuals who wish to become a Member of AACM, but rather than being employed by a Member management company:

are employed as an HOA Coordinator for a builder or developer are employed directly by a Community Association as a Community

Manager are employed as a Community Manager for a non-member

Management Company, or

With regard to excellence, it is not enough to know, but we must try to have and use it. —Aristotle

The ideals which have always shone before me and filled me with the joy of living are goodness, beauty, and truth. To make a goal of comfort or happiness has never appealed to me; a system of ethics built on this basis would be sufficient only for a herd of cattle.

—Albert Einstein

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earned their CAAM® certification as a Community Manager but are no longer performing community management duties and wish to maintain their CAAM® certification.

Membership in AACM is voluntary. AACM’s Code of Professional Ethics and Standards of Practice were adopted in order to provide guidance and rules for all members in the performance of their professional responsibilities. By seeking and attaining certification, the AACM Individual Member or management company Member’s representative assumes an obligation of self-discipline above and beyond the requirements of laws and regulations pertaining to corporations and their members (as stated in the Arizona Revised Statutes, Title 10, Chapters 1 & 19).

A. WHY ETHICS?

Reduced governmental control Reduced litigation Positive public perception Professionalism The principles behind the ethical rules express the profession's recognition of its responsibilities to the public, to clients, and to colleagues. They guide Members and individuals in the CAAM® Certification Program in the performance of their professional responsibilities and express the basic tenets of ethical and professional conduct. The principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.

B. WHAT IS ETHICAL?

In Harvard Business Review’s "Ethics Without the Sermon" (Volume 59, Nov./Dec. 1981), Laura L. Nash created twelve questions for examining the ethics of business decisions. The following list represents ten of those questions that are applicable to AACM Members and individuals in the CAAM® Certification Program. If a Member or an individual in the CAAM® Certification Program is at all unsure that an action or failure to act may be considered unethical, the Member or individual should try analyzing the event by applying these questions prior to making a decision:

1. Have you defined the problem accurately? 2. How would you define the problem if you stood on the other side of

the fence? 3. How did this situation occur in the first place? 4. To whom and to what do you give your loyalty as a person and as a

member of the corporation?

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5. What is your intention in making this decision? 6. How does this intention compare with the probable results? 7. Whom could your decision or action injure? 8. Can you discuss the problem with the affected parties before you

make your decision? 9. Are you confident that your position will be as valid over a long

period of time as it seems now? 10. What is the symbolic potential of your action if understood? If

misunderstood?

II. STRUCTURE OF AACM

A. BOARD OF DIRECTORS

The affairs of AACM shall be governed and managed by a Board of Directors comprised of between three (3) and twelve (12) persons who are each the designated representative for a voting and active Member management company. The Board of Directors shall be elected for staggered two-year terms during or at the conclusion of the Annual Meetings. The following officers of the Board shall be appointed by the Board of Directors for one-year terms: Chair Chair-Elect Immediate Past Chair (may or may not be an elected director) Vice-Chair(s) Secretary Treasurer

B. PROFESSIONAL STANDARDS COMMITTEE

The Professional Standards Committee (“PSC”) shall be appointed by the Board of Directors. The PSC shall be comprised of seven (7) individuals who satisfy the certain criteria as described in the Professional Standards Committee Charter, including but not limited to:

1. Active CAAM® certification;

2. Member management company’s Designated Member or executive-level Designated Committee Representative

3. At least 5 years experience in the Arizona community association management industry;

4. Participate in PSC’s monthly meetings;

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5. Employment by an AACM Member management company in good standing; and not employed by the same company as another member of the PSC;

6. No ethics violations resulting in disciplinary action.

The Board of Directors grants to the PSC the authority and responsibility to:

1. Establish, subject to Board approval, and maintain categories of

violations for which Members and Members’ representatives may be sanctioned, including but not limited to:

a. Failure to comply with the Association’s policies, including its

standards for Member behavior [including but not limited to the AACM Code of Professional Ethics and Standards of Practice];

b. A Member’s, senior management of a Member’s, or Participant’s

conviction of, or plea of guilty or “no contest” with respect to charges of serious criminal conduct related to the Member’s or Participant’s business. The Board or a committee authorized by the Board is responsible for determining whether a matter involves serious criminal conduct; or

c. Failure to pay dues or special assessments within the time frames

(including grace periods) established by the Board of Directors. With respect to such categories, establish and maintain, subject to Board approval, criteria for the application of sanctions that are appropriate under the circumstances. Such sanctions may include expulsion, suspension, fines, and other consequences appropriate under the circumstances. 2. Establish, subject to Board approval, and maintain a membership

discipline process under which:

a. The PSC, with support of the Association’s staff and other resources authorized by the Board, will accept and investigate complaints and concerns about Members and/or Participants who are alleged to have failed to comply with the Association’s policies [including the AACM Code of Professional Ethics and Standards of Practice];

b. The PSC will provide Members and Participants against whom

complaints are raised appropriate opportunities to defend their interests;

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c. The PSC will impose, subject to appeal to the Ethics Appeals Committee, sanctions for Member or Participant actions that fail to comply with the Association’s policies [including the AACM Code of Professional Ethics and Standards of Practice];

d. The PSC process will permit an appeal to the Ethics Appeals

Committee, which will have final discretion in imposing sanctions with respect to any matter; and,

e. Members and others who participate in the discipline process

are required to accept the PSC and Ethics Appeals Committee’s authority and to agree that there is no appeal from the final decisions of the Ethics Appeals Committee resulting from the discipline process.

3. Performing such other duties and responsibilities as may be

designated by the Board of Directors, including but not limited to supervision and implementation of educational programs for AACM and imposing sanctions upon any individual holding a certification issued by AACM who fails to complete any mandatory education requirements or payments in regard to such certification.

C. EXECUTIVE PAID STAFF

The Board of Directors may employ a salaried head of staff who shall have the title of President and may use the title of CEO as well as President.

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III. CODE OF PROFESSIONAL ETHICS AND STANDARDS OF PRACTICE

ARIZONA ASSOCIATION OF COMMUNITY MANAGERS CODE OF PROFESSIONAL ETHICS AND STANDARDS OF PRACTICE

GLOSSARY OF TERMS

AACM Arizona Association of Community Managers Affiliate An individual or company with which a Member or Participant does business or has a relationship. Certification Program An education program, including any continuing education course requirements, offered by AACM. Certified Arizona Association Manager (“CAAM®”) An individual in good standing who meets specific criteria required by AACM and has successfully completed the specific AACM education program requirements to receive the CAAM® designation. Client A Community Association for which a Member, a Participant, or Participant’s company, has agreed to provide management and other services. Code The Arizona Association of Community Managers’ Code of Professional Ethics and Standards of Practice Community Association A type of housing which combines the individual ownership of private dwellings with the shared ownership of common facilities, such as condominiums, townhomes, planned unit developments, and housing co-operatives. Continuing Education Courses provided by AACM to further the education of individuals in good standing who have successfully completed the CAAM® Certification Program with a CAAM® or CAASP™ designation. Designated Member The employee or representative of a Management Company Member named on the AACM Membership Application as the Designated Member with voting rights. In kind Gratuities or other non-cash gifts provided to an individual. Individual A person, regardless of membership or affiliation.

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Individual Member

A Member of AACM that is an: 1. On-site Manager (Association Employee), 2. HOA Coordinator (Developer Employee), 3. Non-member Management Company employee, or 4. Individual who earned CAAM® certification as a Community Manager, but is

no longer practicing community management, and is not otherwise employed or under contract with any Member Management Company. Management Company Member A Member of AACM that is a Management Company and not an individual. Member A Member of AACM, regardless of type of membership as an Individual Member or Management Company Member. Non-member An individual who is not an Individual Member, Management Company Member, employee of a Management Company Member, or a non-employee representative of a Management Company Member. Participant An individual that: 1. is a Certified Arizona Association Manager, 2. has successfully met the criteria for and completed any other designation or certificate in the CAAM® Certification Program, or 3. is registered in any part of the CAAM® Certification Program but has not yet finished completing that program’s requirements. Subordinate An individual employed by or supervised by a Member or Participant.

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RECITALS A. In order to promote and enhance a high level of professional conduct among its membership and

individual participants in the CAAM® Certification Program, the Arizona Association of Community Managers ("AACM") hereby adopts the following Code of Professional Ethics and Standards of Practice (the “Code”).

B. The Code was adopted by the Board of Directors of AACM as its official rules of conduct. The

Code applies to any and all:

1. Management Company Members of AACM, 2. Employees or representatives of Management Company Members of AACM, 3. Individual Members of AACM, 4. Individuals participating in any part of the CAAM® Certification Program,

including continuing education, regardless of membership or CAAM® Certification Program designation or certificate.

5. Graduates of the CAAM® Certification Program including Certified Arizona

Association Managers ("CAAM®s") and all other designations and certificates under the CAAM® Certification Program, regardless of membership.

Individuals described in numbers 4 and 5 above shall herein be referred to as “Participants” for simplification purposes of this Code of Ethics only. C. Members and Participants engaged in the practice of community association management must

observe all rules of conduct stated in the Code. D. A Member or Participant, as applicable, shall not permit anyone under the Member’s or

Participant’s supervision or control to do anything that, if done by the Member or Participant, would violate the Code. Where a subordinate of a Member or Participant violates the Code while working under the supervision or control of a Member or Participant, the Member or Participant is accountable for the violation as if the Member or Participant, as applicable, committed the violation.

E. All provisions of the Code are subordinate to all governmental regulations and are intended to

be implemented in a manner that is consistent with applicable laws and regulations. Nothing in the Code requires or encourages a Member nor a Participant to violate applicable laws or regulations.

F. References in the Code to a “client” refer to a community association for which a Member

has agreed to provide management and other services. G. Any word of general usage contained herein shall be interpreted in light of the prevailing

definition as contained in the then-current edition of Webster’s Unabridged Dictionary.

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CODE OF PROFESSIONAL ETHICS AND STANDARDS OF PRACTICE

1. GENERAL STANDARDS

Loyalty, Fidelity, and Integrity. Members and Participants shall act with loyalty, fidelity and integrity in all aspects of their relationships with clients and in all aspects of representing clients to third parties.

FIDELITY is defined as 1. "Faithfulness to a trust or vow,"and 2. accuracy; exactness. The Member or Participant shall represent with loyalty, fidelity and integrity in all aspects of the Member's or Participant’s relationship with the client and in all aspects of representing the client to third parties.

Honesty. Members and Participants shall be honest and forthright in all professional dealings. Members and Participants shall not misrepresent, either by affirmative statement or material omission, their professional qualifications, experience or capabilities.

Client Confidences. Members and Participants shall honor client confidences, and shall treat the business affairs and records of clients as confidential, unless directed or authorized otherwise by competent authority. Members and Participants shall not make available to business vendors the names, addresses or telephone numbers of the members of a client without the prior written approval of the Board of Directors of the client.

Professional Competence. Members and Participants with the authority to directly contract for management services with clients shall only accept engagements where such Member or Participant can reasonably expect to perform the services with professional competence.

COMPETENCE is derived from education and experience. It begins with a mastery of the knowledge required for CAAM® certification. DILIGENCE imposes the responsibility to render services promptly and carefully and to observe the applicable technical and ethical standards. Members and Participants should be diligent in discharging responsibilities to clients and to the public.

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Due Professional Care. Members and Participants shall exercise due professional care in the performance of their duties.

DUE CARE requires Members and Participants to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a Member's or Participant’s ability with concern for the best interest of those for whom the services are performed and consistent with the profession's responsibility to the public.

Standard of Practice 1-01: EDUCATION

a. Each Member and each Participant shall strive to keep informed of new

developments in community association management, including, but not limited to, legal and accounting principles applicable to community associations.

b. Each Management Company Member shall encourage appropriate continuing education for managers and other appropriate employees in community association management. Members may satisfy this requirement by requiring attendance at professional courses of the AACM CAAM® program[, IREM, CAI, BOMA and other similar professional associations related to the practice of management of community associations].

Each Participant shall seek appropriate continuing education in community association management by attending professional courses of the CAAM® Certification Program.

c. Each Member and each Participant shall encourage officers, Board members, and

committee chairs of clients to participate in courses and seminars which will improve their abilities to serve community association members. [AACM encourages its Members and Participants to take continuing education courses offered by other related organizations and by the business community.] AACM requires each Participant in the CAAM® Certification Program to complete and pass the three core courses and this Ethics course created by AACM. These include: Basics of Association Management Arizona Association Law Arizona Association Finance

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Other courses and seminars are created to help Participants stay abreast of current changes in Arizona laws, new approaches to common problems of management and intermediate and advanced management tools.

Standard of Practice 1-02. USE OF CAAM® DESIGNATION Only an individual may be a Certified Arizona Association Manager (CAAM®) or hold any other designation or certificate offered by AACM. Neither an individual person, an individual person’s company or organization, an Individual Member, a Management Company Member or representative of a Management Company Member, nor other affiliates of an organization engaged in community association management may represent that any individual person, Member or Participant is a Certified Arizona Association Manager (CAAM®) or holds any other designation or certificate offered by AACM at any time before certification is granted or after certification expires, is suspended or is terminated. Standard of Practice 1-03. MEMBER STAFF SUPPORT

a. Each management company Member shall have sufficient qualified staff and

administrative personnel, or a formal arrangement with necessary consultants, so that the Member is capable of providing the services necessary to protect the client's interests.

b. Each Individual Member and/or Participant shall be expected to have

sufficient qualified staff and administrative personnel, or a formal arrangement with necessary consultants, so that the Individual Member and/or Participant is capable of providing the services necessary to protect the client's interests.

[Members are encouraged to employ community managers who are CAAM®-certified.]

Standard of Practice 1-04. COMPLIANCE

Members and Participants shall comply with the provisions of:

i. Arizona Revised Statute, Title 10 (Non-Profit Corporations Act), Chapters 24 through 40.

ii. Arizona Revised Statute, Title 33, Chapters 9

(Condominium Act) and 16 (Planned Communities Act). iii. Other applicable codes, statutes, laws and regulations.

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a. Each Member and each Participant shall comply with the Code.

b. Each Member and each Participant shall comply with all lawful provisions of

the client's governing documents.

[Under AACM's rules, association managers are bound by a duty to become familiar with the governing documents of the Association. The term “governing documents” refers to the Declaration and any other documents, such as Bylaws, operating rules, Articles of Incorporation, or Articles of Association, which govern the operation of the community association.]

c. Each Member and each Participant shall comply with all lawful provisions of written business contracts to which the Member and/or Participant, as applicable, is a party.

2. INTEGRITY AND OBJECTIVITY

No Member or Participant shall knowingly misrepresent, or permit its subordinates or affiliates to misrepresent, any facts in order to benefit the Member, the Member’s company or organization, the Participant, the Participant’s company or organization, or any affiliate. Family members of the Member, or of the Participant, or of owners or employees of the Member’s company or the Participant’s company are considered affiliates. All representations made to a client must be made with the best interest of the client in mind.

3. TECHNICAL STANDARDS

[This section of the Code of Ethics contains several items which must be recommended by the Participant to the Client. One simple way to adhere to these requirements is to send an annual letter to each Board of Directors advising them of these recommendations. A sample of the letter is attached at the end of these course materials.] Each Member and each Participant shall comply with all standards that are currently in force or may from time to time be adopted and promulgated by AACM.

Standard of Practice 3-01. INSPECTION

In accordance with each management agreement with its clients, each Member and each Participant shall make, or cause to be made, regular physical inspections of the common property and assets of its clients. Such inspections shall be "reasonable inspections" made in the manner that a reasonably prudent person exercising ordinary care would make with respect to the person’s property. Members and Participants are not required to make an "expert inspection" of a client’s property,

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such as would be made by a licensed architect, engineer or construction specialist, unless specifically agreed with the client. Standard of Practice 3-02. MAINTENANCE

a. Each Member and each Participant shall recommend that its clients have a

reserve study prepared in a professional manner and that the study be reviewed and updated no less than every three years.

Example: "At least once every three years the board of directors shall cause a study of the reserve account requirements of the community association to be conducted if the current replacement value of the major components which the association is obligated to repair, replace, restore, or maintain is equal to or greater than one-half of the gross budget of the association for any fiscal year. The board shall review this study annually and shall consider and implement necessary adjustments to the board's analysis of the reserve account requirements as a result of that review."

b. Each Member and each Participant shall recommend that its clients establish

and implement a preventive maintenance program. c. The Member’s and/or Participant’s recommendations shall be documented in

the meeting minutes of the client Board meeting where the recommendations are discussed.

Standard of Practice 3-03. LEGAL

a. No Member or Participant shall engage, or allow its employees or subordinates to engage, in the unlicensed practice of law. This provision, however, does not prevent a Member or a Participant from giving clients a business recommendation nor does this provision prevent a Member or Participant from appearing on behalf of a client where authorized to do so by law.

b. Each Member and each Participant shall advise a client if the Member or

Participant, as applicable, believes the client should retain legal counsel. Members and/or Participants may assist the client in retaining qualified counsel if requested. Should the client refuse to retain legal counsel, the Member or Participant shall document its advice and the client’s decision in writing.

c. Each Member and each Participant shall recommend to its clients that the clients complete an appropriate legal review by an attorney knowledgeable in community association law for all significant legal issues. Ordinarily such issues would arise in connection with major contracts, changes to association rules, enforcement procedures and changes to other association documents.

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d. Each Member and each Participant shall recommend that the community association implement a risk management program.

e. Each Member, each Participant and each Member’s employees and

subordinates and Participant’s employees and subordinates involved in the management of the client shall become familiar with and develop a working knowledge of the area of the client’s governing documents that they are involved in managing. (For example, a staff accountant under the Member and/or Participant should know how much an Association can take as an annual increase if they are assigned to that property.)

f. Each Member and each Participant shall recommend that its clients:

1. adopt and publish to the client’s membership written rules governing the client and its members;

2. implement a consistent enforcement policy for the rules subject to the governing documents of the client including its covenants, conditions and restrictions, applicable federal, state and local laws and regulations and the client’s articles of incorporation and bylaws.

Each Member and each Participant shall make reasonable efforts to help clients adopt policies in full compliance with each client’s governing documents.

Standard of Practice 3-04. ACCURATE FINANCIAL RECORDS

[and Right to Review]

Each Member and each Participant shall, at all times, cause to be kept and maintained current and accurate records of all financial transactions, properly marked for identification, concerning the business and assets managed for a client. Each Member and each Participant shall cause to be prepared financial statements in sufficient detail to allow the client's Board and auditor to determine the status of the association's accounts and financial operations. Each Member and each Participant shall make such records available for inspection in accordance with the client’s governing documents and applicable law.

ARS §10-11601 through §10-11605 outlines the provisions by which information and documents must be disclosed to clients. Clients are entitled to review all bank statements, reconciliations, and revenue and expense statements compared to the budget for both reserve and operating funds. Therefore, the Member and/or Participant must make these documents and reports available to the client Board at least quarterly, and to community members upon requires to and in accordance with the aforementioned statutes.

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Standard of Practice 3-05. EXPENDITURE OF FUNDS

A Member, and a Participant, shall, when authorized, endeavor to expend client's funds to achieve the greatest benefit for the client.

Standard of Practice 3-06. COMMINGLING AND SECURITY OF FUNDS

A Member and/or a Participant shall not commingle the Member’s funds, Member’s employer’s funds, Participant’s funds, or Participant’s employer’s funds, as applicable, with any client’s funds. A Member and/or Participant also shall not commingle the funds of one client with those of another. A Member and/or Participant shall deposit all funds of clients in an FDIC-insured financial institution or as otherwise directed by the client’s Board of Directors. A Member and/or Participant shall not knowingly deposit funds in a manner that is not permitted by a client’s governing documents and Arizona law. The managing agent shall not commingle the funds of the association with his or her own money or with the money of others that he or she receives or accepts, unless all of the following requirements are met:

a. The managing agent discloses in the written agreement whether he

or she is deriving benefits from the commingled account or the bank, credit union, or savings institution where the moneys will be on deposit.

b. The written agreement provided pursuant to this subdivision

includes, but is not limited to, the name and address of the bonding companies, the amount of the bonds, and the expiration dates of the bonds.

c. If there are any changes in the bond coverage or the companies

providing the coverage, the managing agent discloses that fact to the board of directors of each affected association as soon as practical, but in no event more than 10 days after the change.

d. The bonds assure the protection of the association and provide the

association at least 10 days' notice prior to cancellation. e. Completed payments on the behalf of the association are

deposited within 24 hours or the next business day and do not remain commingled for more than 10 calendar days.

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Standard of Practice 3-07. BUDGETARY AND FINANCE

a. A Member and/or Participant shall act as a fiduciary on behalf of the client in handling the client's financial affairs. Each Member and each Participant shall put the client's interests above the Member's and Participant’s own, as applicable, in handling the client's financial affairs.

b. Each Member and each Participant shall recommend that clients comply with

the fiscal requirements of Arizona laws and of the client’s governing documents.

c. Each Member and each Participant shall advise clients when the Member or

Participant, as applicable, believes the client should retain the services of a Certified Public Accountant. Members and Participants should assist clients in retaining qualified accounting, investment, and tax advice. Should a client refuse to retain qualified accounting, investment and tax advice, the Member and/or Participant shall document its advice and the client’s decision in writing.

d. Each Member and each Participant shall recommend that his or her clients

file, in a timely manner, applicable quarterly and fiscal year-end tax returns and reports and make required periodic deposits with the IRS, and with other applicable federal, state, and local agencies.

e. Each Member and each Participant shall make financial records available for

inspection and copying by an authorized representative of the community association upon reasonable notice during regular business hours.

Standard of Practice 3-08. RESERVE INVESTMENT

a. Each Member and each Participant shall recommend that its clients invest the client’s funds in accordance with the client’s governing documents and recommend that the primary objectives in investing should be safety first, liquidity second, then yield, and then other considerations.

b. Members and Participants shall refrain from giving investment advice to clients unless qualified to do so by education or professional experience and, if required, properly licensed. If a client requests investment advice, a Member or Participant shall recommend that the client retain qualified investment professionals. Should the client refuse to take the advice to retain an investment professional, the Member and/or Participant shall document its advice and the client’s decision in writing.

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Standard of Practice 3-09. INSURANCE

a. Each Member and each Participant shall advise clients of the need to obtain insurance.

b. Each Member and each Participant shall recommend that clients obtain

qualified professional advice and counsel on insurance coverage consistent with the requirements established in the client’s governing documents and ensure annual review of those requirements and coverages.

c. If a Member or Participant is an independent agent, or an employee of a

management entity, rather than an employee of a client, the Member or Participant shall recommend that:

the Member or Participant, if an independent agent, or the management entity, if the Member or Participant is an employee

of a management entity,

be named as an additional insured under the client’s insurance contracts.

Standard of Practice 3-10. COMMUNICATIONS

a. The Member or Participant shall maintain a Record of Membership for each client, including the names and addresses of the client’s members as provided by the client’s members.

b. Each Member and each Participant shall recommend that its clients have

regular communications with the client’s members.

c. Each Member and each Participant shall help clients disseminate information as required by the client’s governing documents and Arizona law.

Standard of Practice 3-11. TRANSFER OF PROPERTY TO CLIENT

a. Upon written receipt of termination of any management and/or accounting contract, the Member or Participant shall produce to the person designated by the client: Client’s homeowner roster to include current contact and mailing

information Client’s tax identification number and startup funds Client’s governing documents Client’s assessment amount and frequency, grace period, amounts of late

fees and interest Client’s resale and disclosure information within ten (10) business days, regardless of any dispute over termination or fees.

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b. Within thirty (30) days of the termination date, unless otherwise stipulated

and agreed upon in the management/accounting contract, all remaining Client Records, funds, and Property shall be provided to the person designated by the client.

c. As used herein, “Client Records” means physical files (“hard files”) and/or

electronically stored information maintained by the Member and/or the Participant in the ordinary course of business for the client and necessary for the orderly management of the client's affairs. "Client Records" does not include (1) proprietary or other trade secret information developed by the Member or for the Member's or Participant’s own use in the Member's or Participant’s management business or (2) working papers or electronic data developed or created by the Member or Participant.

d. The Member and/or Participant shall produce Client Records in the form in

which they have been kept by the Member or Participant or in a form which the Member or Participant reasonably believes will be usable by the client. The Member or Participant shall produce Client Records in a manner which is convenient, not burdensome, and inexpensive to the Member or Participant. The Member or Participant need not produce Client Records which are not reasonably available because of undue burden or expense. The Member or Participant need not produce Records in more than one form. The Member or Participant need not produce records which have been lost, damaged, altered or overwritten as the result of routine good faith operation of an electronic information system. The Member or Participant need not produce records of telephone conversations or emails, unless they previously have been printed and included in a board packet or vendor/project file.

e. The Member’s or Participant’s obligation to honor all client confidences and to treat the business affairs and records of the client as confidential continues after the conclusion of the engagement for a client.

4. PROFESSIONAL COURTESY AND MARKETING Each Member and each Participant shall exhibit professional courtesy to all community association management professionals. Each Member and each Participant shall be fair in making representations and shall refrain from making defamatory comments about others involved in the community association management profession.

Each Member and each Participant shall assist other Members and Participants in compliance with this Code. No Member or Participant shall make false, fraudulent, misleading or deceptive statements in the marketing of community management services or the solicitation of business.

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All Members and Participants are encouraged to promote fair and open competition and shall avoid unlawful restraints of trade. Each Member and each Participant shall refrain from tortious interference with contractual relationships between community association management professionals and their clients; however, this requirement shall not restrain any Member or Participant from marketing its services in a lawful and honest manner. [Members and Participants shall refrain from unlawful intentional interference with prospective economic advantage. ] AACM and its Professional Standards Committee will only hear and rule on interference with contract cases after a court of law has determined that tortious interference, or intentional interference with prospective economic advantage has occurred. The Professional Standards Committee cannot sit in place of a judicial body to determine the legalities of an act. Under Arizona Law, one who intentionally and improperly interferes with the performance of a contract between another and a third person, by preventing the other from performing the contract or causing his performance to be more expensive or burdensome, is subject to liability to the other for the pecuniary loss.

Standard of Practice 4-01. MARKETING

a. Members and Participants may engage in any form of ethical marketing

including, but not limited to, general mailings of promotional pieces or distributions. Ethical marketing may not contain false, fraudulent, misleading or deceptive statements or claims.

Management marketing programs are encouraged to include: (i) a description of AACM; (ii) a copy of the AACM Code of Ethics; (iii) a description of a CAAM®, and (iv) a description of other professional designations.

b. If invited by the Board of Directors, Members and Participants may meet

with the Board of Directors or others representing a community association to propose services.

c. Ethical marketing does not include the use of proprietary information of

another Member or firm. Proprietary information includes, but is not limited to, (1) client lists, (2) pricing schedules, (3) internal policy and procedures manuals, and (4) other confidential information.

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[A trade secret is comprised of information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

1. derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; or

2. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. In simpler terms, some secret information used in a person's business which is of some competitive advantage to him or her, and which is not disclosed to the public, may be protected under the law, even in the absence of a copyright or patent. In the community management business, trade secrets might include names, addresses and telephone numbers of clients and contacts, insider knowledge regarding the way a community is managed, or the particular client's needs and requirements, and methods of doing business with clients.

Litigation in this area usually arises when agents or employees who after leaving employment, use the information in a competing business. For example, a community manager leaves one management firm for another, and, having taken the prior firm's client list, begins to solicit the prior firm’s clients. When this happens, the former employer can file a lawsuit seeking a variety of remedies, including monetary damages, an accounting for profits gained from the unauthorized use, and an injunction (or court order) preventing further disclosure or unauthorized use of the secret. However, there can be no liability for misappropriation of a trade secret where the former employee uses no confidential information or where the information is readily available to the public. The protection is only against disclosure by "improper means". A trade secret does not offer protection against discovery by fair and honest means, such as by independent invention, accidental disclosure, or by reverse engineering (i.e. starting with the known product and working backward to determine how it was developed or manufactured). Examples of things that have been held to be trade secrets include: special preferences or needs of clients, delivery routes, expiration dates of insurance policies and vital statistics of policyholders.

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AACM will not consider violations of employment contract or non-compete clauses under the Professional Code of Ethics. No violation of employment contracts, either implied or expressed, should be brought before the Professional Standards Committee. AACM does not intend for this Code to govern all business relations and actions. Only those issues having to do with the professional actions or demeanor of the Member or Participant are to be considered. If the perceived violation is an "illegal" act of contract violation or interference, the correct forum is a court of law.]

5. CONFLICTS OF INTEREST

Members and Participants shall disclose real or apparent conflicts of interest with a client or employer. If there is a real or apparent conflict of interest, the Member or Participant, as applicable, shall promptly disclose all pertinent information regarding the conflict to the client and allow the client to make an informed decision as to whether to continue, change, or terminate the relationship. The decision about how to deal with a conflict of interest shall rest with the client and not with the Member or Participant. A Member and/or Participant may recommend to a client a vendor, supplier or contractor who has a financial or other than independent relationship to the Member or Participant, or a family relation or employee of the Member or Participant, only if the Member or Participant discloses the relationship to the client at or before the time the recommendation is made. Standard of Practice 5-01. NON-MANAGEMENT SERVICE

A Member and/or Participant may provide goods or services to clients, other than community association management services, only if the Member and/or Participant makes a full written disclosure no less than annually, of all aspects and relationships that may influence the client’s use of these services. The disclosure shall specifically include any compensation the Member and/or Participant will receive (directly or indirectly) as a result of contracting for these services. The Member and/or Participant must make the disclosure before the award of any contract to provide such goods or services.

a. Where the management contract provides for specific charges or a specific

mark-up for goods or services, the requirement for disclosure is met.

b. Where a contract for goods or services is to be competitively bid and the Member and/or Participant or an allied, related or affiliated company of the Member and/or Participant is a bidder, the bid may only be based on precise written specifications provided to each bidder.

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6. GRATUITIES

AACM discourages the acceptance by Members and/or Participants of gifts, entertainment, or other favors from existing or prospective clients, vendors or suppliers, when such acceptance can unduly influence the Member and/or Participant. No Member or Participant may accept any unearned fees or other forms of remuneration that may actually be, or appear to be, a conflict of interest. Standard of Practice 6-01. FEES AND COMMISSIONS No Member or Participant may accept undisclosed fees, deferred compensation, commissions or similar gratuities in cash or in kind for recommending to or purchasing material or services on behalf of a client.

a. The acceptance of any gratuity in cash is prohibited.

b. The direct acceptance by any Member or Participant described in Recital B, paragraphs 2. through 5. of this document of any gratuity by gift certificate, or in kind, including but not limited to meals, entertainment, housing, transportation, professional services, or of any other nature, having a cumulative value in excess of three hundred dollars ($300.00) from any one person or business in any twelve (12) -month period shall be fully disclosed to all clients which have procured services from the providing person or business and to all clients who contemplate the procurement of such services.

c. Under no circumstances shall a Member or Participant or employee of any

Member of Participant solicit any gratuity, in cash or in kind, on their own behalf or on behalf of another Member, Participant, or employee, regardless of value or type from any one person or business.

7. USE OF CLIENT FUNDS

A Member and/or Participant may not misuse any funds being held for a client under a fiduciary relationship.

8. LIMITATIONS OF PRACTICE

A Member and/or Participant who, by means of contract with a client, performs community association management services and who is also engaged in the practice of another profession, may perform other professional services only if there is full disclosure to all parties to the contract before the services are provided.

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9. ENFORCEMENT

Each Member, as a condition of AACM Membership, and each Participant, as a condition of participation the CAAM® Certification Program both during and after certification:

a. agrees to be bound by and to abide by this Code including duly adopted

amendments;

b. is obligated to participate in compliance and disciplinary proceedings, and to be bound by discipline as determined by the Professional Standards Committee or the Ethics Appeals Committee.

The Member or Participant subject to disciplinary action may, after Hearing, be subject to censure, suspension or termination of membership or certification status.

This Code supersedes and replaces all prior versions of the Code. This Code may be amended from time to time by of the Board of Directors of AACM or by the Professional Standards Committee provided that the Professional Standards Committee’s amendments become permanent only upon ratification by the Board of Directors.

Revised 2.10.11 24

AGREEMENT The signature below certifies that the Member and/or Participant, as indicated, will abide by the Code as stated above and as shall be duly amended from time to time; and agrees that the Member and/or Participant is subject to procedures for compliance or disciplinary action under the Code and the procedures AACM establishes from time to time. Please check all that apply (you may check more than one if applicable) – If you are: Management Company Member’s “Designated Member” – check Management Company Member

Individual Member – check Individual Member

Any person in the CAAM® Program – check Participant

Management Company Member ____________________________________________ COMPANY NAME (Print)

Individual Member ________________________________________________________ INDIVIDUAL MEMBER’S NAME (Print)

Participant _______________________________________________________________

PARTICIPANT’S NAME (Print) _____________________________________ ____________________________________ MEMBER/PARTICIPANT SIGNATURE DATE MAILING ADDRESS (Management Company – list Business Address; Individual Member or Participant – list Home Address*) *for AACM contact purposes only – will not be shared

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IV. DISCIPLINARY AND APPEALS PROCEDURES A. DEFINITIONS

Calendar Days shall be used wherever a time certain is provided. Code of Ethics and Standards of Practice shall be defined as the Code of Professional Ethics and Standards of Practice of the Arizona Association of Community Managers. Committee shall be defined as the Professional Standards Committee (PSC). Committee Chairperson shall be defined as the Chairperson of the Professional Standards Committee. Complainant(s) shall be defined as the individual(s) who file an Original Complaint with the Professional Standards Committee. Final Disposition shall be defined as the time at which disciplinary action becomes effective as a result of (a) a finding by the Committee, (b) the expiration of the period of time during which an appeal may be filed, or (c) a matter being dismissed with no disciplinary action imposed. Improper Conduct shall be defined as conduct that violates the Bylaws, Rules and Regulations, and/or the Code of Professional Ethics and Standards of Practice for the Arizona Association of Community Managers. Investigation shall be defined as a review by the appropriate committee or designee who, on their own, may conduct the inquiry. Majority Vote shall be conducted as stated herein under sections of these procedures, and defined as more than one-half of the votes cast. Notify shall be defined as the forwarding of correspondence via registered or certified mail, or traceable overnight delivery, to Party or Parties, which may include, but is not limited to, copies of the Original Complaint, notice of institution of investigation, notice of hearing, findings and conclusions of hearing, and notice of discipline. Original Complaint shall be defined as the initial complaint received by the Committee on the Original Complaint Form, complete, and with all exhibits.

Revised 2.10.11 26

Party (Parties) shall be defined as the Complainant(s) and/or the Respondent(s) in an ethics proceeding. "Outside Party (Parties)" shall be defined as Complainant(s) other than the Committee, which shall include members or non-members. Respondent(s) shall be defined as the individual(s) against whom an Original Complaint is filed, and who is alleged to have violated the Code of Professional Ethics and Standards of Practice, Bylaws and/or Rules and Regulations of the Arizona Association of Community Managers. Unethical Conduct shall be defined as conduct which violates the Code of Professional Ethics and Standards of Practice for the Arizona Association of Community Managers.

B. OTHER DEFINITIONS

These definitions were obtained from Black’s Law Dictionary and Merriam Webster’s Unabridged Dictionary, 10th Edition.

Due care is just, proper, and sufficient care, so far as the circumstances demand it. It is the absence of negligence. Due diligence is the care that a reasonable person exercises under the circumstances to avoid harm to other persons or their property. Ethics are the principles of conduct governing an individual or a group. Ethical is the description of behavior conforming to accepted professional standards of conduct. Fidelity is faithfulness to something to which one is bound by pledge or duty. Libel is a false and unprivileged publication by writing, printing, picture, effigy, or other fixed representation to the eye, which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation.

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Slander is a false and unprivileged publication, orally uttered, and also communications by radio or any mechanical or other means which: 1. Charges any person with crime or with having been indicted, 2. Imputes in him the present existence of an infectious, contagious, or

loathsome disease; 3. Tends directly to injure him in respect to his office, profession, trade, or

business, either by imputing to him general disqualification in those respects which the office or other occupation particularly requires, or by imputing something with reference to his office, profession, trade or business that has a natural tendency to lessen its profits;

4. Imputes to him impotence or want of chastity; or 5. Which by natural consequence causes actual damage.

C. DISCIPLINARY AND APPEALS PROCEDURES:

PROFESSIONAL STANDARDS COMMITTEE

1. FILING A COMPLAINT Any person or entity may file a complaint against a Member or Participant. The AACM CEO/President is contacted, and coordinates efforts to resolve the issue between the parties before an official Complaint is filed. If resolution cannot be reached through discussion, the "Original Complaint" is sent to AACM on the Original Complaint Form, along with copies of items pertinent to the Complaint as described on the Form. It is sent to the AACM CEO/President who provides the initial review. The AACM CEO/President shall provide written notification to the Complainant and Respondent that a complaint has been received, and an investigation of the complaint may begin. PSC Members and both parties to the Complaint have the opportunity to indicate a potential conflict of interest; PSC members may recuse themselves if appropriate.

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2. CONFIDENTIALITY

Action taken by the Professional Standards Committee (the “Committee”) shall remain confidential, and shall only be reported to the Board of Directors and senior AACM staff until appeals procedures have been completed. The disciplinary action taken shall be made public in case of censure with publication, suspension, or termination.

3. PRELIMINARY REVIEW

Upon review of an Original Complaint, the Committee may determine that the matter: a. Contains insufficient information on which to base a

determination; b. Does not constitute an issue involving unethical or improper

conduct; c. Is unworthy of further consideration; d. Is valid and contains sufficient information on which to

conduct an investigation; or e. Is valid and contains sufficient information and evidence to

document that an ethics violation or improper conduct may have occurred.

4. INVESTIGATION

Committee notifies the Respondent(s) that an investigation is being undertaken. The Respondent has twenty-one (21) days from the date the notice was sent to submit a response to the Original Complaint. Failure to reply will not prevent further proceedings. Based on the Investigation, the Original Complaint may be modified and the final complaint will become the Formal Complaint, which will be provided for the Respondent(s).

5. DISPOSITION

Upon determining that unethical or improper conduct may have occurred, the Complainant(s) and Respondent(s) shall be notified of the Hearing, and shall be provided a copy of the Formal Complaint, including all supporting evidence.

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The Respondent(s) shall have twenty-one (21) days from receipt of the notification of Hearing within which to submit a written response or notice of intent to be present at the Hearing. The date of the Hearing shall be established so that at least 21 days’ prior written notice shall be given to the parties. Either party may request, in writing, a postponement of the Hearing date.

6. HEARING PROCEDURES

At least ten (10) days prior to the Hearing, a list of witnesses and other participants from all Parties shall be provided to the Committee Chairperson, who will then distribute the lists to the Committee and the Parties. Either the Committee or one of the Parties may request a court reporter and the cost shall be borne by the party requesting the service. Each participant shall have opportunity for testimony, examination and cross-examination.

7. ADJOURN

After the hearing, the chairperson shall dismiss the parties, recess the meeting and convene an executive session of the Committee. When the Committee has reached a decision, the Chairperson shall close the executive session and reconvene the Hearing without the attendance of the Complainant or Respondent. The decision of the Committee shall be recorded in the record of the Hearing.

8. DECISION

The Committee shall render its written decision no later than sixty (60) days after the conclusion of the Hearing. The decision shall contain findings of fact, conclusion, and if appropriate, a statement of disciplinary action imposed by the Committee. The decision shall be filed with the AACM CEO/President for the Board of Directors of AACM, or if no CEO/President is employed by AACM, with the Chair of the Board of Directors of AACM. Copies shall be mailed to the Complainant, the Respondent, and all members of the Committee.

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9. DISCIPLINARY ACTION TAKEN

Disciplinary action may consist of one or more of the following sanctions, as the Committee deems appropriate: a. Letter of censure, with or without publication of

determination. b. Suspension of membership or certification for not more than

six months, with publication of determination and the Respondent’s name(s).

c. Termination from membership or certification, with

publication of determination and the Respondent’s name(s).

If no appeal is filed by either the Complainant or Respondent after the date of the written decision, it becomes final, binding and effective on the day after any appeal could have been properly filed.

10. RESIGNATION

If a Respondent resigns its membership or certification at any time during the Investigation or proceeding after an Original Complaint has been filed, the complaint shall be dismissed without further action by the Committee and the Respondent may reapply for membership or certification after two (2) years have elapsed from the date of resignation.

11. APPEAL

Either party may file an appeal with the AACM CEO/President, or if no CEO/President is employed by AACM, with the Chair of the Board of Directors of AACM within fifteen (15) days of the date of the mailing of the written decision of the Professional Standards Committee. Any notice of appeal must be in writing and be signed by the Appellant. No member of the Professional Standards Committee who participated in the Hearing before the Ethics Appeals Committee Hearing, or who otherwise may have a conflict of interest, shall be permitted to serve on the Ethics Appeals Committee and shall immediately disqualify himself or herself from serving. The date of the Appeals Hearing shall be established so that at

Revised 2.10.11 31

least twenty-one (21) days’ prior written notice shall be given to the Parties. Each Party in the Appeals Hearing, or his or her representative, shall notify the Ethics Appeals Committee Chairperson at least ten (10) days in advance of the Hearing date whether the individual or his or her representative shall attend the Hearing. Each party may request, in writing, a postponement.

12. DECISION OF ETHICS APPEALS COMMITTEE

The Ethics Appeals Committee Hearing panel shall base its decision only on the evidence, documentation or testimony that was presented at the Hearing before the Professional Standards Committee, the official transcript of that Hearing and the testimony of the parties. The decision of the Ethics Appeals Committee Hearing panel shall be by a majority vote of the panel. The Ethics Appeals Committee shall render its written decision no later than forty-five (45) days after the conclusion of the Ethics Appeals Hearing. A decision of the Ethics Appeals Committee shall be final and binding. After the Appeal is concluded, a report shall be made to the Board of Directors and the Professional Standards Committee.

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SAMPLE BOARD RECOMMENDATION LETTER

TO: Board of Director Clients DATE: December 1, 2010 RE: 2011 Annual Recommendations Dear Members of the Board: The purpose of this letter is to present our annual recommendations for your discussion, adoption and implementation. You may already be following these important recommendations and if so, you can consider them reminders! If you are not already in a position to be adhering to each item, please consider this for 2011. The recommendations are noted below:

1. Prepare a reserve study in a professional manner and have it reviewed and updated every three years. Documentation of this recommendation shall be made part of your minutes of the meeting where the matter was discussed.

2. Establish and implement a preventative maintenance program.

3. Implement a risk management program.

4. Legal review, where appropriate, by an attorney knowledgeable in community association law is to be considered for all legal issues, including but not limited to, major contracts, association rules, enforcement procedures and association documents.

5. Services of a Certified Public Accountant, where appropriate, should be retained and assist for qualified accounting, investment and tax advice.

6. File, in a timely manner, applicable quarterly and fiscal year-end tax returns and reports and make required periodic deposits with the IRS, and with other applicable federal, state, and local agencies.

7. Invest association funds in accordance with the association’s legal documents. Primary objectives when investing should be safety first, liquidity second, then yield and then other considerations. Investments should be limited to deposit accounts insured by the FDIC, or U.S. Treasury Securities or other full faith and credit obligations of the Federal Government, or money funds which invest exclusively in these instruments and which are FDIC insured.

8. Comply with the fiscal requirements of Arizona laws, in addition to the community association’s legal documents.

9. Written rules should be established and published to the community association membership and the publication and implementation of a consistent enforcement policy based on federal, state and local laws and regulations, as well as the governing documents of the association.

10. Obtain appropriate and sufficient insurance by obtaining professional advice on insurance coverage consistent with the requirements established in the governing documents, and have a review of those requirements and coverages annually. Your management company may also require they are named as an additional insured under the association’s insurance contract.

11. Have regular communication with the membership.

Your manager can certainly expound upon any of these subjects at your board meeting. However, if you need any further assistance, please don’t hesitate to contact me! You may reach me at 101-202-3030 or at manager@mgmtcompany.com. Sincerely, Sally Sample, CAAM® Community Association Manager