ALL YOU NEED TO KNOW ABOUT THE CFA’S CODE OF ETHICS

The Chartered Financial Analyst (CFA®) Program is a globally recognized professional credential offered to investment and financial professionals by the CFA Institute, formerly known as the Association for Investment Management and Research (AIMR). Earning this credential takes an average of four years and demonstrates a professional’s level of commitment to ethics and professionalism.

The CFA program provides an in-depth knowledge of various aspects of finance and covers a range of topics highly relevant to areas such as; financial analysis, investment management, stocks, bonds, and derivatives. Upon successful completion, candidates earn the "CFA charter" and become a "CFA charter holder".

WHAT IS THE CODE OF ETHICS?

The Code of Ethics and Standards of Professional Conduct (Code and Standards) are the ethical standards for investment professionals around the world. As a member of the CFA Institute or a candidate of the CFA Program, you are required to follow the Code and Standards.

WHY DO WE NEED THE CODE OF ETHICS?

To retain the public’s trust in financial markets and in the investment profession, premium ethical standards are essential. This is why the CFA Institute Code of Ethics and Standards of Professional Conduct are crucial to the values of CFA Institute and essential to achieving its mission to attain a level of global leadership by setting optimal benchmarks for education, integrity, and professional excellence.

A comprehensive and excellent review of the CFA Code of Ethics is available here.

WHAT DOES THE CODE OF CONDUCT ENTAIL?

In its simplest form, the CFA code of ethics states that professionals and candidates must adhere to the following principles;

1. Professionalism

• Members and candidates must have an in-depth knowledge of the law, understand and comply with all applicable laws, rules, and regulations of any regulatory body or government governing their professional activities.
• Members and candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. This involves avoiding offering or soliciting for gifts.
• Members and candidates must not intentionally misrepresent investment analysis, recommendations, actions, or other professional activities.
• Members and candidates must avoid engaging in any professional misconduct and adhere to the principles that uphold the Code of Ethics.


2. The Integrity of Capital Markets


• Members and candidates must avoid unethical handling of material nonpublic information that could affect the value of an investment.
• Members and candidates must avoid unethical actions that may manipulate prices or increase trading volume with the aim of deceiving market participants.

3. Duties to Clients


• 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.
• Members and Candidates must be fair and objective deal when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities with clients.
• In an advisory situation, members and candidates must:
a. Investigate, reassess and update clients or prospective clients’ investment background, requirements and financial constraints before making any investment recommendation or taking investment action.
b. Determine if an investment action is suitable for a client’s investment needs and financial constraints before taking any investment action.
c. Assess the appropriateness of investments in relation to the client's information.
• Investment performance information must be presented in a way that is accurate, complete and fair.
• Former, current or potential clients’ information must be kept confidential except when;
a. The client or prospective client’s information contains illegal activities.
b. Disclosure is necessitated by law.
c. Permission is given by the client or prospective client to disclose information.


4. Duties to Employers


• Members and candidates must be loyal to their employers and work only for their benefit.
• Members or candidates must not accept gifts or compensation that may cause conflict between them and their employers unless permitted by their employers.
• At the supervisory level, members and candidates must ensure that anyone subject to their supervision or authority must adhere to the codes and standards, rules, regulations and laws that govern the profession.

5. Investment Analysis, Recommendations, and Action
a. Diligence and Reasonable Basis.
• Members and Candidates must be diligent and thorough in analyzing investments, making investment recommendations, and taking investment actions and have a reasonable basis for doing so.
b. Communication with Clients and Prospective Clients.
• Members and Candidates must disclose to potential clients and clients the inner workings of any investment process.
• Identify the important factors that affect these investment processes and relay them to clients or potential clients.
• Clearly define facts and opinions while presenting investment analysis and making recommendations.
• Develop and retain appropriate records needed to validate investment-related communications with clients and prospective clients.


6. Conflicts of Interest


• Matters that could cause conflict and impair independence and objectivity in dispensing their duties to clients, potential clients, and employers, must be disclosed in simple, plain language.
• Members and candidates must prioritize investment transactions for clients and employers over investment transactions for beneficial owners.
• Members and Candidates must make known to their employer, clients, and prospective clients, referral fees paid to or received from others for products or services.

7. Responsibilities as a CFA Institute Member or CFA Candidate

• Members and Candidates must not engage in any conduct that compromises the reputation, integrity, and validity of the CFA Institute and its examinations.
• Members and candidates must refrain from misrepresenting or exaggerating the meaning or implications of the CFA membership, candidacy or holding the CFA designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.