CFA Level I: Ethical and Professional Standards

Ethical and Professional Standards have a very high value on ethics in CFA for all three levels and consider as a fundamental value and essential, which used to help in achieving the mission that can lead in profession globally by promoting the highest standard of ethics, educations and professional excellence for the benefit of society.

In this topic, the questions in an exam may provide you with a particular situation and require you to judge whether the cases have violated any part of the Code of Ethics or Standards of Professional Conduct. Candidates must know the ideas and concept of the importance of ethical behaviour in the investment industry and the ways to apply the Code of Ethics into ethical decision making.
There are five readings on this topic. Let’s look at what can we learn from the five passages.

Reading 1 Ethics and Trust in the Investment Profession

In this reading, we can know the overview of the importance of ethics for investment professionals. Ethics encompass a set of rules and moral principles of conduct that guide our behaviour. Candidates can learn the introduction of ethics, identify the challenges face to the ethical practices, and able to describe the role of Code of Ethics in defining a profession. The problems of ethical behavioural may include one’s being too confident in their morality, underestimate the effect of situational influences, and focusing too much on the immediate rather than long-term outcomes or consequences of a decision.

Besides learning how to describe the needs for high ethical standards in the investment industry, candidates are also able to distinguish the difference between moral and legal standards. Code of Ethics helps to foster the confidence of the public with the use of their specialised skills and knowledge to serve on their clients to advance their profession.

Reading 2 Code of Ethics and Standards of Professional Conduct

In this reading, candidates can learn more about the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of Code and Standard. The most crucial part in this section is that candidates must understand the six components of Code and Ethics and 7 Standards of Professional Conduct. The Code of Ethics and Standard of Professional Conduct served as an ethical benchmark for investment professionals around the world. It is essential that a candidate must understand more on the moral responsibilities which are required by the Code and Standard, including with the subsections of each of the standard.

Reading 3 Guidance for Standards of Professional Conduct

The Standard of Professional Conduct is the heart of ethics content in CFA exam. In this reading, candidates can know how to apply the Code of Ethics and Standard of Professional Conduct to the ethical dilemmas which can happen in days-to-days professional activities. In the CFA textbook Level I of this reading, there are few real-world examples of situations and guidance which can help candidates to have a better understanding for each sub-sections for the 7 types of Standards of Professional Conduct.

Besides candidates can learn on how to distinguish the conduct that conforms to the Code and Standards and behaviour that may violate the Code and Standards, they will also be able to learn on to recommend the practices and procedures designed to prevent the violations of the Code of Ethics and Standard of Professional Conduct.

Reading 4 Introduction to the Global Investment Performance Standards (GIPS)

The objective of this reading is to ensure the Level I candidates can approach the assigned sections of Global Investment Performance Standards (GIPS). GIPS played an essential role because through the compliance with the GIPS; it is to assure the firm’s historical results are present consistently and fairly. From this reading, candidates can understand what the reasons of Global Investment Performance Standards (GIPS) are being created, what parties can claim the GIPS standards compliance and who will be benefited and served by the standards.

Besides, candidates are also able to understand what is the construction and critical notions of the composites in the performance reporting preview the structure of the standards and even able to learn on how to explain on the requirements for verification.

Reading 5 The GIPS Standards

In the last reading of this chapter, candidates can learn the key features of the Global Investment Performance Standards (GIPS) and the fundamental compliance. There is nine significant sections of GIPS will be discussed in this reading. Besides, candidates are also able to learn the scope of the GIPS Standards concerning the investment firm’s definition and no further on what is the requirement a firm should meet before claim the GIPS compliance. For examples, GIPS reporting standards require the firms to publish 5 years of investment results and so on to claim the GIPS compliance.

The most critical part in this reading is the candidates can learn on how is the GIPS standards are implemented in the countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulation conflict.

Conclusion

In conclusion, all CFA members and candidates are obliged to obey by the provision of the Code of Ethics and Standards of Professional Conduct. Any violations of the Code of Ethics or Standards of Professional Conduct may result in appropriate disciplinary sanctions including, but not limited to, the exclusion from the CFA Program or the revocation of the CFA designation.

Written by Stell Goh | 30 May 2019.

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