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<!doctype html>
<html lang="en">
<head>
<meta charset="utf-8">
<title>Study Session 1 | Reading 2 | Guidance for Standards I-VII</title>
<meta name="description" content="Chartered Financial Analyst Level 3 Study Materials">
<meta name="author" content="MacLane Wilkison">
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<body>
<div class="reveal">
<!-- Any section element inside of this container is displayed as a slide -->
<div class="slides">
<section>
<h1>Reading 2</h1>
<h3>Guidance for Standards I-VII</h3>
<p>
<small>Created for <a href="http://alchemistsacademy.com">AlchemistsAcademy</a> by <a href="http://alchemistsacademy.com/about">MacLane Wilkison</a></small>
</p>
</section>
<section>
<h2>Introduction</h2>
<p>The following is a discussion of the recommended procedures for compliance for each of the relevent Standards</p>
</section>
<section>
<section>
<h1>Standard I - Professionalims</h1>
</section>
<section>
<h2>A. Knowledge of the Law</h2>
<ul>
<li>Members and Candidates should:</li>
<ol>
<li>Stay informed</li>
<li>Review procedures</li>
<li>Maintain current files</li>
<li>Make reasonable efforts to understand applicable laws</li>
<li>Seek the advice of legal counsel when in doubt</li>
</ol>
<li>Firms should:</li>
<ol>
<li>Develop and/or adopt a code of ethics</li>
<li>Provide information on applicable laws</li>
<li>Establish procedures for reporting violations</li>
</ol>
</ul>
</section>
<section>
<h2>B. Independence and Objectivity</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Protect the integrity of opinions</li>
<li>Create a restricted list</li>
<li>Restrict special cost arrangements</li>
<li>Limit gifts</li>
<li>Restrict employee investments</li>
<li>Review procedures</li>
<li>Establish an independence policy</li>
<li>Appoint an officer with oversight responsibilities</li>
</ol>
</ul>
</section>
<section>
<h2>C. Misrepresentation</h2>
<ul>
<li>Members and Candidates should:</li>
<ol>
<li>Publish only factual presentations</li>
<li>Prepare a summary of his qualifications and experience</li>
<li>Verify third-party information</li>
<li>Maintain and refresh informmation contained on webpages</li>
<li>Avoid plagiarism by (1) maintaining copies, attributing quotations, and (3) attributing summaries</li>
</ol>
</ul>
</section>
<section>
<h2>D. Misconduct</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Develop a code of ethics</li>
<li>Develop a list of potential violations and associated disciplinary actions</li>
<li>Verify references of potential employees</li>
</ol>
</ul>
</section>
</section>
<section>
<section>
<h1>Standard II - Integrity of Capital Markets</h1>
</section>
<section>
<h2>A. Material Nonpublic Information</h2>
<ul>
<li>Members and firms should:</li>
<ol>
<li>Achieve public dissemination of material information</li>
<li>Adopt compliance procedures</li>
<li>Adopt discolsure procedures</li>
<li>Issure press realeases</li>
<li>Establish firewalls to prevent release of MNPI</li>
<li>Monitor appropriate interdepartmental communication</li>
<li>Establish physical separation of departments</li>
<li>Prevent overlap of personnel between departments</li>
<li>Establish a reporting system</li>
<li>Implement personal trading limitaitons</li>
<li>Maintain records</li>
<li>Implement proprietary trading procedures</li>
<li>Disseminate compliance policies and guidelines</li>
</ol>
</ul>
</section>
<section>
<h2>B. Market Manipulation</h2>
<ul>
<li>Members and firms should:</li>
<ol>
<li>Avoid the dissemination of false or misleading information</li>
<li>Avoid transactions that deceive or would be likely to mislead market participants by distorting the price-setting mechanism of financial instruments</li>
</ol>
</ul>
</section>
</section>
<section>
<section>
<h1>Standard III - Duties to Clients</h1>
</section>
<section>
<h2>A. Loyalty, Prudence, and Care</h2>
<ul>
<li>Members should:</li>
<ol>
<li>Provide client's with regular account information</li>
<li>Receive client approval for any questionable matters</li>
</ol>
</ul>
</section>
<section>
<h2>A. Loyalty, Prudence, and Care (cont'd)</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Follow all applicable rules and laws</li>
<li>Establish the investment objectives of the client</li>
<li>Consider all the information when taking actions</li>
<li>Diversify</li>
<li>Carry out regular reviews</li>
<li>Deal fairly with all clients with respect to investment actions</li>
<li>Disclose conflicts of interest</li>
<li>Disclose compensation arrangements</li>
<li>Vote proxies</li>
<li>Maintain confidentiality</li>
<li>Seek best execution</li>
<li>Place client interests first</li>
</ol>
</ul>
</section>
<section>
<h2>B. Fair Dealing</h2>
<ul>
<li>When dealing with recommendations firms should:</li>
<ol>
<li>Limit the number of people involved</li>
<li>Shorten the time frame between decision and dissemination</li>
<li>Publish guidelines for pre-dissemination</li>
<li>Strive for simultaneous dissemination</li>
<li>Maintain a list of clients and their holdings</li>
<li>Develop and document trade allocation procedures</li>
</ol>
<li>Firms should also:</li>
<ol>
<li>Disclose trade allocation procedures</li>
<li>Systematically review accounts</li>
<li>Disclose service levels</li>
</ol>
</ul>
</section>
<section>
<h2>C. Suitability</h2>
<ul>
<li>Members should:</li>
<ol>
<li>Create a written IPS for clients</li>
<li>Regularly update clients' IPS</li>
</ol>
<li>Firms should:</li>
<ol>
<li>Develop suitability test policies</li>
</ol>
</ul>
</section>
<section>
<h2>D. Performance Presentation</h2>
<ul>
<li>Firms should comply with GIPS standards</li>
<li>If not compliant, Members should:</li>
<ol>
<li>Consider the knowledge and sophistication of the audience to whom a presentation is addressed</li>
<li>Present the performance of the weighted composite of similar portfolios rather than a single representative account</li>
<li>Include terminated accounts in performance history</li>
<li>Include appropriate disclosures explaining reported results</li>
<li>Maintain data and records used to calculate performance results</li>
</ol>
</ul>
</section>
<section>
<h2>E. Preservation of Confidentiality</h2>
<ul>
<li>Members should:</li>
<ol>
<li>Avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client or to the appropriate authorities in the event of illegal activity on the part of the client</li>
</ol>
</ul>
</section>
</section>
<section>
<section>
<h1>Standard IV - Duties to Employers</h1>
</section>
<section>
<h2>A. Loyalty</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Establish a clear competition policy</li>
<li>Establish a clear termination policy</li>
<li>Establish incident-reporting procedures</li>
<li>Classify employees</li>
</ol>
</ul>
</section>
<section>
<h2>B. Additional Compensation Arrangements</h2>
<ul>
<li>Members should:</li>
<ol>
<li>Make immediate written disclosures to their employer describing any compensation they propse to receive for services in addition to the compensation received from the employer</li>
</ol>
</ul>
</section>
<section>
<h2>C. Responsibilities of Supervisors</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Establish compliance procedures for their code of ethics</li>
<li>Ensure adequate compliance procedures</li>
</ol>
</ul>
</section>
</section>
<section>
<section>
<h1>Standard V - Investment Analysis, Recommendations, and Actions</h1>
</section>
<section>
<h2>A. Diligence and Reasonable Basis</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Establish policies requiring investment analyses to have a reasonable and adequate basis</li>
<li>Develop detailed, written guidance for due diligence procedures</li>
<li>Develop measurable criteria for assessing resarch quality</li>
<li>Develop measurable criteria for assessing outside providers</li>
<li>Adopt a standardized set of criteria for evaluating the adequacy of external advisers</li>
</ol>
</ul>
</section>
<section>
<h2>B. Communication with Clients and Prospective Clients</h2>
<ul>
<li>Members should:</li>
<ol>
<li>Maintain records indicating the nature of their research and should be able to supply additional information to the client, upon request</li>
</ol>
</ul>
</section>
<section>
<h2>C. Record Retention</h2>
<ul>
<li>Firms and Members should:</li>
<ol>
<li>Maintain records that support investment actions</li>
<li>Archive research notes and other documents that support their current investment-related communications</li>
</ol>
</ul>
</section>
</section>
<section>
<section>
<h1>Standard VI - Conflicts of Interest</h1>
</section>
<section>
<h2>A. Disclosure of Conflicts</h2>
<ul>
<li>Members should:</li>
<ol>
<li>Disclose special compensation arrangements with their employer that might conflict with client interests</li>
</ol>
<li>Firms should:</li>
<ol>
<li>Include information on compensation packages in firms' promotional literature</li>
</ol>
</ul>
</section>
<section>
<h2>B. Priority of Transactions</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Limit participation in equity IPOs</li>
<li>Restrict participation in private placements</li>
<li>Establish blackout/restricted periods</li>
<li>Establish reporting requirements and procedures</li>
<li>Disclose policies relating to personal investing</li>
</ol>
</ul>
</section>
<section>
<h2>C. Referral Fees</h2>
<ul>
<li>Firms should:</li>
<ol>
<li>Develop procedures related to referral fees</li>
<li>Provide notification to clients of approved referral fee programs</li>
</ol>
</ul>
</section>
</section>
<section>
<section>
<h1>Standard VII - Responsibilities as a CFA Insitute Member or Candidate</h1>
</section>
<section>
<h2>A. Conduct as Members and Candidates in the CFA Program</h2>
<ul>
<li>Members/Candidates should:</li>
<ol>
<li>Avoid any impropriety related to the CFA examination</li>
<li>Avoid disclosing details related to the CFA examination</li>
</ol>
<li>It is permissible to express an opinion regarding the CFA Program or Institute
</ul>
</section>
<section>
<h2>Reference to the CFA Institute, the CFA Designation, and the CFA Program</h2>
<ul>
<li>Reference the CFA Institute, Designation, and Program in the correct manner</li>
</ul>
</section>
</section>
<section>
<h1>THE END</h1>
<h3><a href="http://alchemistsacademy.com">AlchemistsAcademy.com</a></h3>
</section>
</div>
</div>
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