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Members and Candidates have a duty of loyalty to their clients and
must act with reasonable care and exercise prudent judgment. Members and
Candidates must act for the benefit of their clients and place their
clients' interests before their employer's or their own interests.
Client interests always come first.Exercise the prudence, care, skill,
and diligence under the circumstances that a • person acting in a like
capacity and familiar with such matters would use.Manage pools of client
assets in accordance with the terms of the governing • documentsMake
investment decisions in the context of the total portfolio.•Vote proxies
in an informed and responsible manner. Due to cost benefit •
considerations, it may not be necessary to vote all proxies.Client
brokerage, must be used to
Understand that an adequate compliance system must meet industry
standards, regulatory requirements, and the requirements of the Code and
Standards.bring an inadequate compliance system to the attention of
firm's management and recommend corrective action.limit the suspected
employee's activitiesfaced with no compliance procedures or with
procedures he believes are inadequate must decline supervisory
responsibility in writing until adequate procedures are adopted by the
firm.
When Members and Candidates are in an advisory relationship with a
client, they 1. must:a. Make a reasonable inquiry into a client's or
prospective clients' investment experience, risk and return objectives,
and financial constraints prior to making any investment recommendation
or taking investment action and must reassess and update this
information regularly.b. Determine that an investment is suitable to the
client's financial situation and consistent with the client's written
objectives, mandates, and c
Members and Candidates must not accept gifts, benefits, compensation,
or consideration that competes with, or might reasonably be expected to
create a conflict of interest with, their employer's interest unless
they obtain written consent from all parties involved.
Put the needs and circumstances of each client and the client's
investment objectives • into a written IPS for each client.Consider the
type of client and whether there are separate beneficiaries, investor •
objectives (return and risk), investor constraints (liquidity needs,
expected cash flows, time, tax, and regulatory and legal circumstances),
and performance measurement benchmarks.Review investor's objectives and
constraints periodically to reflect any changes in • client
circumstances.
Independent practice for compensation is allowed if a notification is
provided to the employer fully describing all aspects of the services,
including compensation, duration, and the nature of the activities and
if the employer consents to all terms of the proposed independent
practice before it begins.
Members and Candidates must make reasonable efforts to detect and
prevent violations of applicable laws, rules, regulations, and the Code
and Standards by anyone subject to their supervision or authority.
Submit to clients, at least quarterly, itemized statements showing all
securities in custody and all debits, credits, and transactions.
When communicating investment performance information, Members or
Candidates must make reasonable efforts to ensure that it is fair,
accurate, and complete.
If illegal activities by a client are involved, members may have an
obligation to report the activities to authorities.The confidentiality
Standard extends to former clients as well.The requirements of this
Standard are not intended to prevent Members and Candidates from
cooperating with a CFA Institute Professional Conduct Program (PCP)
investigation.
Members and Candidates must keep information about current, former,
and prospective clients confidential unless:The information concerns
illegal activities on the part of the client or prospective 1.
client,Disclosure is required by law, or2.The client or prospective
client permits disclosure of the information
Members must avoid misstating performance or misleading
clients/prospects about investment performance of themselves or their
firms, should not misrepresent past performance or reasonably expected
performance, and should not state or imply the ability to achieve a rate
of return similar to that achieved in the past. For brief
presentations, members must make detailed information available on
request and indicate that the presentation has offered limited
information.
When Members and Candidates are responsible for managing a portfolio
2. to a specific mandate, strategy, or style, they must make only
investment recommendations or take investment actions that are
consistent with the stated objectives and constraints of the portfolio.
Members and Candidates must deal fairly and objectively with all
clients when providing investment analysis, making investment
recommendations, taking investment action, or engaging in other
professional activities.
Members must take steps to prevent employees from violating laws,
rules, regulations, or the Code and Standards, as well as make
reasonable efforts to detect violations. Members with supervisory
responsibility should enforce firm policies regarding investment or
non-investment behavior (e.g., mandatory vacations) equally.
Limit the number of people who are aware that a change in
recommendation will be • made.Shorten the time frame between decision
and dissemination.•Publish personnel guidelines for
pre-dissemination—have in place guidelines • prohibiting personnel who
have prior knowledge of a recommendation from discussing it or taking
action on the pending recommendation.Simultaneous dissemination of new
or changed recommendations to all candidates • who have expressed an
interest or for whom an investment is suitable.Main
In advisory relationships, be sure to gather client information at the
beginning of the relationship, in the form of an investment policy
statement (IPS). Consider clients' needs and circumstances and thus
their risk tolerance. Consider whether or not the use of leverage is
suitable for the client.
Considering the sophistication of the audience to whom a performance
presentation • is addressed.Presenting performance of weighted composite
of similar portfolios rather than a • single account.Including
terminated accounts as part of historical performance and clearly
stating • when they were terminated.Including all appropriate
disclosures to fully explain results (e.g., model results • included,
gross or net of fees, etc.).Maintaining data and records used to
calculate the performance being presented
In matters related to their employment, Members and Candidates must
act for the benefit of their employer and not deprive their employer of
the advantage of their skills and abilities, divulge confidential
information, or otherwise cause harm to their employer.
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