The Standards of Professional Conduct

I. Professionalism

A. Knowledge of the Law

Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities.
In the event of conflict, Members and Candidates must **comply with the more strict law, rule, or regulation**.
Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations

B. Independence and Objectivity

Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities.
Members and Candidates MUST NOT offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity.

C. Mispresentation

Members and Candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.

D. Misconduct

Members and Candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence.

II. Integrity of Capital Markets

A. Material Nonpublic Information

Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.

B. Market manipulation

Members and Candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.

III. Duties to Clients

A. Loyalty, Prudence and Care

Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. 忠诚责任；合理关怀；审慎判断
Members and Candidates must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests. 客户利益＞雇主利益＞个人利益

B. Fair Dealing

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. 执业时应公正、客观地对待所有客户

C. Suitability

1. When Members and Candidates are in an advisory relationship with a client, they must:
   a. Make a reasonable inquiry into a client’s or prospective client’s 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.（做出投资推荐前要先了解客户信息，并进行及时更新）
   b. Determine that an investment is suitable to the client’s financial situation and consistent with the client’s written objectives, mandates, and constraints before making an investment recommendation or taking investment action. 投资决策符合客户金融状况；符合客户的书面委托（目标、限制等）
   c. Judge the suitability of investments in the context of the client’s total portfolio. 要在total portfolio的角度下考虑某项投资是否合适
   2. When Members and Candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must make only investment recommendations or take only investment actions that are consistent with the stated objectives and constraints of the portfolio. 若有明确的的委托（投资策略、风格等），必须严格按照委托进行投资

   D. Performance Presentation

   When communicating investment performance information, Members and Candidates must make reasonable efforts to ensure that it is fair, accurate, and complete.

   E. Preservation of Confidentiality

   Members and Candidates must keep information about current, former, and prospective clients confidential unless:
   1. The information concerns illegal activities on the part of the client or prospective client,
   2. Disclosure is required by law, or
   3. The client or prospective client permits disclosure of the information.
   必须对客户的信息进行保密处理（以上三种情况除外）

   IV. Duties to Employers

   A. Loyalty

   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.
   不能凭借技能凌驾雇主；不能泄露机密信息；不能做其他危害雇主的事

   B. Additional Compensation Arrangements

   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.
   不接受会产生利益冲突的礼物、好处、薪金等（除非获得所有相关利益方的书面许可）

   C. Responsibilities of Supervisors

   Members and Candidates must make reasonable efforts to ensure that anyone subject to their supervision or authority complies with applicable laws, rules, regulations, and the Code and Standards.
   有监管责任的M&C，需保证所监管人群的合规性

   V. Investment Analysis, Recommendations, and Actions

   A. Dillgence and Reasonable Basis

   Members and Candidates must:
   1. Exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions. 投资分析与决策时保持勤勉、独立和彻底
   2. Have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action.

   B. Communication with Clients and Prospective Clients

   Members and Candidates must:
   1. Disclose to clients and prospective clients the basic format and general principles of the investment processes they use to analyze investments, select securities, and construct portfolios and must promptly disclose any changes that might materially affect those processes
   向客户展示投资过程的基本形式与原则；立即通知客户投资重大变化
   2. Disclose to clients and prospective clients significant limitations and risks associated with the investment process. 公开投资过程的关键限制和风险
   3. Use reasonable judgment in identifying which factors are important to their investment analyses, recommendations, or actions and include those factors in communications with clients and prospective clients.
   4. Distinguish between fact and opinion in the presentation of investment analysis and recommendations.

   C. Record Rentention

   Members and Candidates must develop and maintain appropriate records to support their investment analyses, recommendations, actions, and other investment-related communications with clients and prospective clients. 保持执业记录

   VI. Conflict of Interest

   A. Disclosure of Conflicts

   Members and Candidates must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and employer. 完整、公正的公开影响自己独立性和客观性的潜在利益冲突
   Members and Candidates must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively. 公示位置突出、公示语言平实、信息沟通有效

   B. Priority of Transaction

   Investment transactions for clients and employers MUST have priority over investment transactions in which a Member or Candidate is the beneficial owner（average也不行）

   C. Referal Fees

   Members and Candidates must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services. 必须向雇主、客户、潜在客户公示投资推荐费

   VII. Responsibilities as a CFA Institute Member or CFA Candidate

   A. Conduct as Participants in CFA Institute Programs

   Members and Candidates must not engage in any conduct that compromises the reputation or integrity of CFA Institute or the CFA designation or the integrity, validity, or security of CFA Institute programs.

   B. Reference to CFA Institute, the CFA Designation, and the CFA Program

   When referring to CFA Institute, CFA Institute membership, the CFA designation, or candidacy in the CFA Program, Members and Candidates must not misrepresent or exaggerate the meaning or implications of membership in CFA Institute, holding the CFA designation, or candidacy in the CFA Program.

   SS01 Ethical and Professional Standards

   R01 Ethics and Trust in the Investment Profession

   a. explain ethics;

2. ethical behavior is that which conforms to a set of rules and moral principles based on shared beliefs aboubt behavior is acceptable and what behavior is unacceptable.

   b. describe the role of a code of ethics in defining a profession;

3. a code of ethics is a written set of moral principles that can guide behaviour by describing what is considered acceptable behavior

4. a p**r**ofession refers to a group of people with specialized skills and knowledg__e _who serve other and agrees to _behave in accordance with a code of ethics.

   c. describe professions and how they establish trust;

5. a profession is an occuptional group that has requirements of specialized expert knowledge, and often a focus on ethical behavior and service to the larger community or society

6. ways to establish trust:

   • requiring high standard of expertise, knowledge, and skill
   • establishing standards of ethical behavior
   • monitoring profrssional conduct
   • encouraging continuing education to maintain and increase competence
   • being focused on clients’ needs
   • mentoring and inspiring others in profession

     d describe the need for high ethical standards in investment management;

7. investment advice and management are intangible products, making quality and value received more difficult to evaluate than for tangible products.（金融服务属于无形资产→难以估值）

8. failure to act in highly ethical manner can damage not only client wealth but also impede the success of investment firms and investment professional (potential investors will be less likely wo use thier services)（不当行为影响公司/行业的发展）
9. unethical behavior can have negative effects for society as a whole (增加融资成本)
10. unethical behavior can affect the allocation of the capital that is raised (资源分配不优，影响经济增长）
    

    e explain professionalism in investment management;

• suitability standard

match between client return requirements and risk tolerances and the charactertistics of the securities recommended

• fiduciary standard

requiring professionals to use their knowledge and expertise to act in _the __best interest _of the client

f identify challenges to ethical behavior;

1. individuals tend to overrate the ethical quality of their behavior on a relative basis and overemphasize the importance of their own personal traits in determining the ethical quality of their behavior (自我评价过高）
2. situational influences （上级/同事压力、对金钱权力等短期利益的追求）
3. Firms with strict rules-based compliance procedures run the risk of fostering a culture that is so focused on adhering to compliance rules that individuals only ask themselves what they can do.（规定过细会过分简化道德决策过程）

   g distinguish between ethical and legal standards;

• Not all unethical actions are illegal, and not all illegal actions are unethical.
• Ethical principles often set a higher standard of behavior than laws and regulations. New laws and regulations often result from recent instances of what is perceived to be unethical

• Ethical decisions require more judgment and consideration of the impact of behavior on many stakeholders compared to legal decisions.

  h describe a framework for ethical decision making

• Identify Relevant facts, stakeholders and duties owed, ethical principles, conflicts of interest.

• Consider: Situational influences, additional guidance, alternative actions.
• Decide and act
• Reflect: Was the outcome as anticipated? Why or why not?

  R02 Code of Ethics and Standards of Professional Conduct

  a describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the Code and Standards;

1. Structure of CFAI P.C.P.
   

The CFA Institute Professional Conduct Program is covered by the CFA Institute Bylaws and the _Rules of Procedure for Proceedings Related to Professional Conduc_t. The Program is based on the principles of fairness of the process to members and candidates and maintaining the confidentiality of the proceedings.
The CFA Institute Board of Governors has overall responsibility for the Professional Conduct Program and its Disciplinary Review Committee is responsible for enforcing of the Code and Standards

1. Circumstances can prompt such an inquiry

• Self-disclosure by members or candidates on their annual Professional Conduct Statements of involvement in civil litigation or a criminal investigation, or that the member or candidate is the subject of a written complaint. 自我披露；书面投诉
• Written complaints about a member or candidate’s professional conduct that are received by the Professional Conduct staff 书面投诉
• Evidence of misconduct by a member or candidate that the Professional Conduct staff received through public sources, such as a media article or broadcast. 公开来源的证据
• A report by a CFA exam proctor of a possible violation during the examination. CFA考试违规
• Analysis of exam materials and monitoring of social media by CFA Institute. CFAI通过考试材料和社会媒介发现的违规行为

1. Once an inquiry has begun

• an written explanation from the subject member or candidate M/C进行书面解释
• interview the subject member/candidate 对M/C进行面谈
• interview the complainant or other third parties 和投诉人/其他人进行面谈
• collect document and records relevant to the investigation 收集相关材料

1. The Professional Conduct staff may decide

• that no disiplinary sanctions are approprite 不进行处分
• to issue a cautionary letter 发出警告信
• to discipline the member or candidate 对M/C进行处罚

1. 调查决定/member回应

• In a case where the Professional Conduct staff finds a violation has occurred and proposes a disciplinary sanction, the member or candidate may accept or reject the sanction.
• If the member or candidate chooses to reject the sanction, the matter will be referred to a _disciplinary review panel _of CFA Institute members for a hearing.
• Sanctions imposed may include condemnation by the member’ peers or suspension of candidate’s continued participation in the CFA Program.

  b state the six components of the Code of Ethics and the seven Standards of Professional Conduct;

1. six components of the Code of Ethics
   

• Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.（对所有相关方 诚实、保持竞争力、勤勉、尊重 in an ethical manner）
• Place the integrity of the investment profession and the interests of clients above their own personal interests. (行业/客户利益至上）
  
• Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.（专业性、独立性）
• Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession. （遵守/鼓励他人遵守职业道德）
• Promote the integrity and viability of the global capital markets for the ultimate benefit of society. （促进全球资本市场的完善与发展，最终服务于社会）
• Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals. （保持并精进自己的职业竞争力，同时鼓励他人这么做）

1. The Standards of Professional Conduct

I. Professionalism
II. Integrity of Capital Markets
III. Duties to Clients
IV. Duties to Employers
V. Investment Analysis, Recommendations, and Actions
VI. Conflicts of Interest
VII. Responsibilities as a CFA Institute Member or CFA Candidate

c explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard

I. Professionalism
A. Knowledge of the Law

B. Independence and Objectivity

C. Mispresentation

D. Misconduct

II. Integrity of Capital Markets
A. Material Nonpublic Information

B. Market manipulation

III. Duties to Clients
A. Loyalty, Prudence and Care

B. Fair Dealing

C. Suitability

D. Performance Presentation

E. Preservation of Confidentiality

IV. Duties to Employers
A. Loyalty

B. Additional Compensation Arrangements

C. Responsibilities of Supervisors

V. Investment Analysis, Recommendations, and Actions
A. Dillgence and Reasonable Basis

B. Communication with Clients and Prospective Clients

C. Record Rentention

VI. Conflict of Interest
A. Disclosure of Conflicts

B. Priority of Transaction

C. Referal Fees

VII. Responsibilities as a CFA Institute Member or CFA Candidate
A. Conduct as Participants in CFA Institute Programs

B. Reference to CFA Institute, the CFA Designation, and the CFA Program

R03 Guidance for Standards I–VII

a demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity;

b distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards;

c recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct.

R04 Introduction to the Global Investment PerformanceStandards (GIPS)

a explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the standards;

1. why the GIPS standards were created

In the past, a variety of reporting procedures were misleading at best. Some of these misleading practices included:

• Representative accounts—showing a top-performing portfolio as representative of a firm’s results.（选择性展示表现好的投资组合）
• Survivorship bias—excluding ‘weak performance’ accounts that have been terminated.（幸存者偏差）
• Varying time periods—showing performance for selected time periods with outstanding returns.（仅展示outstanding时期数据）

GIPS [GLOBAL INVESTMENT PERFORMANCE STANDARDS ]

• GIPS are a set of ethical principles based on a standardized, industry-wide approach.
• Investment firms can voluntarily follow GIPS in their presentation of historical investment results to prospective clients.
• These standards seek to avoid misrepresentations of performance.（GIPS的目的是避免mispresentation）

1. Apply&Serve

• GIPS apply to investment management firms** and are intended to serve prospective and existing clients of investment firms. （GIPS适用于投资管理公司，帮助**客户对公司进行比较）
• GIPS allow clients to more easily compare investment performance among investment firms and have more confidence in reported performance.

  b explain the construction and purpose of composites in performance reporting;

1. composites 的定义

A composite is a grouping of individual discretionary portfolios representing a similar investment strategy, objective, or mandate. e.g. ‘Large Capitalization Growth Stocks’ and “Investment Grade Domestic Bonds.”

1. purpose：有利于客户获得公司的信息
   

Reporting on the performance of composites gives clients and prospects information about the firm’s success in managing various types of securities or results for various investment styles.

1. Construction
   

A composite must include all **fee-paying, discretionary portfolios** (current and past) that the firm has managed in accordance with this particular strategy.
The firm should identify which composite each managed portfolio is to be included in before the portfolio’s performance is known. This prevents firms from choosing portfolios to include in a composite in order to create composites with superior returns（在得到收益前进行construct，避免选择性construct）

c explain the requirements for verification.

1. Verification—requirements:

Verification is performed by a **third party, not by the firm itself, on a** firm-wide basis.
This third party verifier must attest that

• the firm has complied with all **GIPS requirements for composite construction on a firm-wide basis**
• the firm’s processes and procedures are established to present performance in accordance with the calculation methodology required by GIPS, the data requirements of GIPS, and in the format required by GIPS.
  1. Verification—recommendations:
  • Firms are encouraged to pursue independent verification. Verification applies to the entire firm’s performance measurement practices and methods, not a selected composite.
  • Verified firms should include the following disclosure language:
    “[Insert name of firm] has been verified for the periods [insert dates] by [name of verifier]. A copy of the verification report is available upon request. ”

R05 Global Investment Performance Standards (GIPS)

a describe the key features of the GIPS standards and the fundamentals of compliance;

1. key feature

• To claim compliance, an investment management firm must define its ‘firm’. This definition should reflect the ‘distinct business entity’ that is held out to clients and prospects as the investment firm
• GIPS are ethical standards for performance presentation which ensure fair representation of results and full disclosure.
• 🔴Include all **actual fee-paying, discretionary portfolios in composites** for a minimum of five years or since firm or composite inception. After presenting five years of compliant data, the firm must add annual performance each year going forward up to a minimum of 10 years.
• Firms are required to use certain calculation and presentation standards and make specific disclosures.
• Input data must be accurate.
• GIPS contain both required and recommended provisions—firms are encouraged to adopt the recommended provisions.
• Firms are encouraged to present all pertinent additional and supplemental information.
• There will be** NO partial compliance and only FULL compliance can be claimed. **
• Follow the local laws for cases in which a local or country-specific law or regulation conflicts with GIPS, but disclose the conflict. GIPS若与法律冲突，遵守法律规定，定公开冲突细节
• Certain recommendations may become requirements in the future
• Supplemental private equity and real estate provisions contained in GIPS are to be applied to those asset classes.

1. fundamentals of compliance
   

Fundamentals of compliance contain both **requirements and recommendations :**

• Definition of the firm—requirements:
  • Apply GIPS on a firm-wide basis.
  • Firm must be defined as a distinct business unit.
  • Total firm assets include total market value of discretionary and nondiscretionary assets, including fee-paying and non-fee-paying accounts.
  • Include asset performance of sub-advisors, as long as the firm has discretion over subadvisor selection
  • If a firm changes its organization, historical composite results CANNOT be changed
• Definition of the firm—recommendations:
  • Include the broadest definition of the firm, including all geographical offices marketed under the same brand name
• Document policies and procedures—requirements:
  • Document, in writing, policies and procedures the firm uses to comply with GIPS
• Claim of compliance—requirements:
  • Once GIPS requirements have been met, the following compliance statement must be used:“[Insert name of firm] has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).”
  • NO partial compliance.
  • There are to be no statements referring to calculation methodologies used in a composite presentation as being ‘in accordance with GIPS’ or the like. GIPS不涉及具体的具体的计算方法
  • Similarly, there should be no such statements referring to the performance of an individual, existing client as being ‘calculated in accordance with GIPS’ or the like, unless a compliant firm is reporting results directly to the client.
• Firm fundamental responsibilities—requirements:
  • Firms MUST provide a compliant presentation to all PROSPECT (prospect must have received a presentation within the previous 12 months).
  • Provide a composite list and composite description to all prospects that make a request. List discontinued composites for at least five years.
  • Provide, to clients requesting it, a compliant presentation and a composite description for any composite included on the firm’s list.
  • When jointly marketing with other firms, if one of the firms claims GIPS compliance, be sure it is clearly defined as separate from noncompliant firms.
  • Firms are encouraged to comply with recommendations and must comply with all requirements. Be aware of updates, guidance statements, and the like.

    b describe the scope of the GIPS standards with respect to an investment firm’s definition and historical performance record;

1. investment firm’s definition
   

• GIPS compliance must be firmwide, where the ‘firm’ is the distinct business entity that is **held out to clients and prospects.**
• The definition of the firm, for purposes of GIPS compliance, must be the corporation, subsidiary, or division that is held out to clients as a business entity.

1. historical performance record
   

• A firm’s initial GIPS-compliant historical performance record must include a minimum of five years of historical data, or since firm or composite inception.
• After the five years has been achieved, the firm must add one additional year of performance each year, up to a minimum of 10 years.

• Non-GIPS-compliant information may be linked to compliant history, but no noncompliant performance can be presented after January 1, 2000. Firms must clearly identify the noncompliant portion of results.

  c explain how the GIPS standards are implemented in countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulations conflict;

• Firms that presented performance in compliance with a Country Version of GIPS (CVG) may claim GIPS compliance for any CVG-compliant results prior to January 1, 2006.

• If country-specific regulations conflict with GIPS, firms must follow the applicable country-specific regulations but must also disclose the nature of the conflict with GIPS.

  d describe the nine major sections of the GIPS standards.

1. Fundamentals of Compliance. issues for firms to consider when claiming GIPS compliance (e.g., firm definition).
2. Input Data. Input data should be consistent in order to establish full, fair, and comparable investment performance presentations.
3. Calculation Methodology. Certain uniform methodologies are required for portfolio and composite return calculations.
4. Composite Construction. Creation of meaningful, asset-weighted composites is important to achieve a fair presentation.
5. Disclosures. Certain information must be disclosed about the presentation and the policies adopted by the firm.
6. Presentation and Reporting. Investment performance must be presented according to GIPS requirements, and when appropriate, other firm-specific information should be included.
7. Real Estate. These provisions apply to all real estate investments regardless of the level of control the firm has.
8. Private Equity. These must be valued according to the GIPS Private Equity Valuation Principles, unless it is an open-end or evergreen fund (which must follow regular GIPS).
9. Wrap Fee/Separately Managed Account (SMA) Portfolios. Certain special GIPS standards apply to these.