Okay, the clock is running down for the CFA Level 2 exam in June. This week I have been focussing on Ethics. Key Learning points are: 6 principles and 7 standards.
PRINCIPLES
- Act with competence, integrity and diligence (ACID)
- Place Clients before Personal interests (PCP)
- Use reasonable care and exercise judgement (URCJ) – how you would address Reggie Perrin’s boss
- Promote integrity of capital markets (PICM) – pick me – Shrek
- Practice and Encourage Other to act ProfessionalLy and Ethically (PEOPLE)
- Maintain and Improve professional Competence (MIC)
STANDARDS
- Professionalism – know the law, operate within it and be objective
- Integrity of Capital Markets – don’t use material non public info or manipulate the market
- Duties to clients – be loyal, prudent, fair and choose suitably and be discreet
- Duties to employers - loyal and tranparent on outside income and be an effective supervisor
- Investment analysis – diligent, sound investing, clear disclosure, and distinguish fact from opinion
- Conflicts of interest – disclose conflicts of interest and referrals, and prioritise transactions
- CFA Membership – Maintain reputation and use CFA trade mark appropriately
I scored 35/40 on Concept Checkers and 14/18 for the 3 item sets
For the CFA Institute Soft Dollar Standards and the Research Objectivity Standards the key is to remember what is REQUIRED and what is RECOMMENDED. There does not seem to be any underlying principles involved here that are useful in distinguishing so I think this is one to memorize.
I hope there is a question on New Prudent Investor vs Old Prudent Man. The theme is consistent and clear here: total return instead of capital protection, risk management rather than risk avoidance, portfolio scope rather than individual investments, no product restrictions and duty of a trustee to delegate responsibility to an expert investment manager rather self-manage the fund.
Next week, Regression Analysis. I bet you can hardly contain yourself.
