Standards

• 专业
o Professional
§ Knowledge of the law
§ Objective & Independence
§ Misrepresentation
§ Misconduct
o Capital Market
§ Non-public material information
§ Market manipulation
• 责任 Duties
o Clients
§ Diligence, Care
§ Fairness
§ Suitability
§ Confidential
§ Performance
o Employer
§ Loyalty
§ Additional arrangement
§ Responsibilities of Supervisors
• 投资
o Investment Analysis, Recommendations, and Actions
§ Diligence and Reasonable Basis
o Conflicts of Interests
• CFA
o CFA Program
o CFA Designation

III (B) Fair Dealing

• Guidance
o Do not discriminate against any clients
o Does not mean equally
o Disclose different service levels
• Compliance
o Limit the number of people
o Shorten the time frame between decision and dissemination.
o Maintain list of clients and holdings
o Develop written trade allocation procedures
o Disclose trade allocation procedures
o

III (C) Suitability

• Consider
o Risk and return objective
o Investment experience

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 o Financial constraints
• Follow
o Written objective, mandates, and constraints
o In the context of total portfolio
• Guidance
• Guidance - Unsolicited Trade Requests
o Discuss with client the reason (based on IPS)
o Minimal effects
§ Follow firm’s policy
§ Client: acknowledge the discussion and an understanding of why the
trade is unsuitable
o Material impact
§ Upgrade the IPS
• Yes:
§ Reject to upgrade IPS
• Follow firm policy
o Can be made in a separate client-directed account
• No other option
o Reconsider whether to maintain the relationship
o Compliance
§ Put needs into a written IPS for each client
§ Consider: objective (return and risk), constraints (liquidity, cash flow,
time, tax, regulatory and legal circumstances) and performance
measurement benchmarks.
o

III (D) Performance Presentation

•
III (E) Confidentiality
• Unless
o Illegal activities
o By law
o Permits the disclosure
• Guidance
o Clients: current, former, prospective
• Compliance
o Can disclose to authorized co-workers
o Follow firm procedures
§ Supervisor, compliance, legal advice
§ Disassociation

IV Duties to Employers
IV (A) Loyalty
• Guidance
o Client interests > employer but consider
§ Integrity and sustainability
• Guidance - Employer

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 o Give a copy of Code & Standards
• Guidance – Independent Practice 兼职
o Fully Disclose all aspects of service
§ Compensation, duration, nature of activities
§ Employer consents
• Guidance – Leaving an Employer 离职
o Continue to act in the best interests

IV (B) Additional Compensation Arrangements

• Define
o Cannot accept gifts, benefits, compensation, or considerations 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.
• Guidance
o Direct and indirect compensation from a client and other benefits received
from third parties.
o Written consent: email
o Work part time should discuss any arrangements that may compete with
their employer’s interest.
• Compliance
o Make an immediate written report
o Disclose compensation and services
o Performance incentives should be verified by the offering party

IV (C) Responsibilities of Supervisors

• Define
o Ensure anyone subject to their supervision or authority complies with
applicable laws, rules, regulations, and the Code and Standards.
• Guidance - Compliance Procedures
o Compliance system meet industry standards, regulatory requirements, and
Code & Standards.
o Bring an inadequate compliance system to the attention of firm’s
management and recommend corrective action.
o Limit the suspected employee’s activities
o Decline supervisory responsibility in writing until adequate procedures are
adopted by the firm.
• Compliance
o Adequate compliance procedure
§ Clearly written, easy to understand, a compliance officer, scope,
permitted conduct
o Once instituted, should
§ Distribute it to proper personnel, update it as needed, educate staff
regarding procedures, professional conduct evaluations, review
employee actions to monitor compliance and identify violations.
§ Enforce procedures once a violation occurs

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 § Review procedures and identify any changes needed to prevent
violation in the future

Standard V

V(A) Diligence and Reasonable Basis

• Define
o
• Guidance
o The degree of diligence, thoroughness of research, and the proper level of
investigation
• Guidance – Reasonable Basis
o Global and national economic conditions
o Financial results, operating history, business cycle stage.
o Fees and historical results for a mutual fund
o Limitations of any quantitative models used
o Determination of whether peer group comparisons for valuation are
appropriate
• Guidance – Secondary or Third-Party Research
o Review assumptions used
o Determine how rigorous the analysis was
o How timely the research is
o Evaluate objectively and independence of the recommendations
• Guidance – Using Quantitative Research
o Explain the basic nature of the quantitative research
§ How it is used to make investment decisions
o Assess downside risk and time horizon
o Ensure both positive and negative cycle results have been considered
• Guidance – Developing Quantitative Research
o Greater diligence
o Understand the technical details of the products
o Test is thoroughly, including extreme scenarios with inputs that fall outside
the range of historical data, before offering it to clients
• Guidance – External Advisors
o Review advisers
o Have adequate compliance and internal controls
o Present returns information that is correct
o Do not deviate from stated strategies
• Guidance – Group research and Decision making
o Do not agree with results, but does not necessarily to decline to be identified
with the report, as long as there is a reasonable and adequate basis
• Compliance
o Written guidance for proper research and due diligence
o Measurable criteria for judging the quality of research

V(B) Communications with Clients and Prospective clients

• Define

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 o Disclose to clients and prospective clients the basic format and general
principles of the investment processes
o Promptly disclose any changes that might materially affect those process
o Significant limitations and risks associated with the investment process
§ Liquidity and capacity
o Identify which factors are important to their investment analyses and include
them in communications with clients and prospective clients
o Distinguish between fact and opinion in the presentation of investment
analysis and recommendations
• Guidance
• Compliance
o Maintain records and be able to supply additional information upon
requested

V(C) Record Retention

• Define
o Develop and maintain appropriate records to support their investment
analysis
• Guidance
o Keep at least 7 years
o All communications with clients through any medium, including emails and
text messages, are records that must be retained
o Change firms must recreate analysis documentation supporting her
recommendation using publicly available information or information
obtained from the company. Must not rely on memory or materials created
at her previous firm.
• Compliance
o Firm’s responsibility

Standard VI Conflicts of Interest

Standard VI (A) Disclosure of Conflicts

• Define
o Must make full and fair disclosure of all materials that could impair their
independence and objectivity or interfere with respective duties to their
clients, prospective clients, and employer.
• Guidance
o Fully disclose to clients, prospects, and their employers all actual and
potential conflicts in order to protect investors and employers.
o Disclosure must be clearly stated.
• Guidance – Disclosure to Clients
• Guidance – Disclosure to Clients
• Compliance