I.

Professionalism

I A - Knowledge of Law
- Understand & comply with all applicable laws, rules & regulation.
- In event of conflicts - comply with more strict law applicable.
- Not participate or assist in any violation.
- Encourage employees to bring an end to such activity.
- If it continues, dissociate yourself from any such violation.
- Document any violation when you dissociate yourself from prohibited activity.
- When in doubt first contact the council to confirm if there has been a violation.
- If colleague is doing wrong- determine the legality.
- Suggest him & let him know he is doing wrong.
- If he doesn't agree, inform the supervisor.
- If supervisor does not take any actions and it continues, dissociate yourself from any such violation.
- When you dissociate you must also report the activity to appropriate authorities.
- You don't need to report the violations to government authorities unless required by the law. (Reporting is
recommended but not required)

I. Professionalism
SITUATIONS
 Members and candidates are not to commit any act that they know or should know violates the
codes and standards.

 In the absence of specific applicable law or other regulatory requirement, code and standards
govern the candidates' actions.

Note: If a member violates any standard, he automatically violates standard I(A) as well.

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Recommended Procedures
 Stay Informed
 Review Procedures
 Maintain current files
 Take effort to understand the law for the geographic area where you are operating
 When in doubt or in need, it s encouraged that the member take the advice of either the firm’s legal
department, or take advice of external legal advice
 A member may have to resign, if the need arises
 Firms should 1. Develop a code of ethics, 2. Provide information on applicable laws, 3. Establish
procedures for reporting violations

I. Professionalism
I B - Independence and Objectivity
- Let analyst maintain independent and fair opinion and not let investment process be influenced by external
sources.
- Recommendation must contain your true opinion, free from bias.

SITUATIONS
 BUY SIDE CLIENTS MAY TRY TO PRESSURE SELL SIDE ANALYST.

 IF BROKERAGE HOUSE HAS "SELL" RECOMMENDATION AND INVESTMENT BANKING DEPARTMENT

ASKS THEM TO CHANGE IT TO BUY,
- In Both the above situations, changing recommendation would be a violation.

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 - Permitted action:- Place the company on a restricted list and give only factual information about the
company.

 IF INVESTMENT BANKING DEPARTMENT HAS MATERIAL NON-PUBLIC INFORMATION.

- Brokerage firm must establish physical and informational barriers within the firm to prevent
exchange of information.
- Create restricted list and firewalls between research and investment banking activities.
- Restrict employee investment in equity IPO. (Requires Pre approval).
- It is appropriate to have an analyst work with an International Bank in a road show when potential
conflicts are managed and disclosed.

I. Professionalism
 IF CFA MEMBER RECEIVES INVITATION FROM BUSINESS ASSOCIATES FIRM TO SPEND WEEKEND IN
HIGH QUALITY RESORT.
-Refuse the invitation if the associate is from a firm that he analyzes for his employer.
-Obtain written consent from his supervisor if the offer is contingent on achieving a target
investment return.

 ISSUER PAID RESEARCH

It is allowed, but requires that members & candidates limit the type of compensation they accept for
writing a research report so that it is not dependent on the conclusion of research report.
BEST PRACTICE (recommendation): flat fee is preferred without regard to conclusion of the report.
Compensation for the report should be disclosed.
 TRANSPORT & HOTEL CHARGES

Pay for our commercial transport & hotel charges.

Limit use of corporate aircraft to cases in which commercial transportation is available.
(Recommended but not required).
Allows analyst to accept transportation, lodging expenses & compensation for writing a research
report but with proper disclosures for such an arrangement in his report.
Best practice: Dictates that firms adopt a strict policy of not accepting compensation for travel
arrangement.
Note: At times accepting travel arrangements would not compensate one's "independence and
objectivity".

I. Professionalism
 GIFTS
Limit gifts to token items.
Can accept bonuses from clients but must be disclosed to employer.
Modest gifts are permitted, but must be disclosed to employer. [So that employers can monitor the
situation to guard against any favoritism towards the gift-giving client].
It is recommended to inform before accepting ( if possible ) or subsequently.
Distinguish between gifts from clients & entities seeking to influence.
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 This standard does not require disclosing the gifts to other clients.

Recommended Procedures
 Secondary fund managers and custodians do strong marketing, a member must evaluate their
services in light of quality of service and cost involved, in a independent and objective manner, and
not in light of any incentive or commission, gifts, contributions that might affect their independence
 Sometimes public companies adopt a retaliatory and unpleasant behavior towards firms who issue
unfavorable reports on the company’s stock, members must not come under this pressure and
always issue independent reports after conducting proper due diligence.
 Protect the integrity of opinions
 Establish a policy and review procedures
 Appoint an officer responsible for ensuring compliance with code and laws

I. Professionalism
I C - MISREPRESENTATION
- Do not give false impressions.

SITUATIONS
 RETURN GUARANTEE

-Do not guarantee return on investment unless the guarantee is built into the structure of product
itself.
-Recommending purchase of mutual fund that solely invests in long run US Treasury Bonds [saying its
risk free] is a violation. [Though the govt. bonds are default risk free, but they are subject to price
risk].
- Document forecasts, earning projections, asset values etc.
-Bank CD is a guarantee, not a violation.

 PLAGIARISM (Includes written material, oral & tele communication.)

- Do not use someone else's work without giving them credit for it.
-Showing somebody's work to your employer as your own, (even though he agrees ) is a violation.
-Using somebody else's model for analysis without identifying them is a violation.
-Using financial data [factual info] from statistical websites from Bloomberg, Reuters is permitted.
-The error if unintentional is not a violation provided the member makes reasonable effort to rectify
it, merely informing the error in marketing material & simultaneously distributing it is a violation.
-Employing ideas with proper acknowledgement is not a violation.

Recommended Procedures
 When using material and services from third party/external managers/agencies, do not represent
that work as your own, make clear disclosures as to the work done by others, misrepresentations in
such third party material and services also become the responsibility of the member/firm.

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  When using social media, members or firms are allowed to disseminate the same information as they
are allowed to disseminate through traditional means. Ensure all information released through social
media adheres to applicable laws and the code.
 Do not omit poor performing account to inflate your performance numbers. Do not engage in cherry
picking.
 A firm is entitled to use the work done by a member(while in employment) who has now left the
firm.
 Members and employees must understand and have a clear cut picture of the services and products
offered.
 Members are encouraged to prepare a summary of his qualifications, experience and capabilities
regarding their service offering.
 Verify outside information
 Have a policy of plagiarism

I. Professionalism
I D - MISCONDUCT
- Dishonesty, fraud or any other activity that would have a negative impact on the reputation of the
profession, integrity or competence is considered a VIOLATION. [loyalty, cheating, stealing]

SITUATIONS
 A candidate's conduct, which affected his work, professional integrity, judgment or reputation, is
considered a violation.

 Drinking during working hours, advising to take drugs, murder is all considered a violation.

 Exception: This however does not stop the professional from engaging in acts of civil disobedience in
support of personal belief. [E.g. going on an agitation against corruption]

 Give employees a list of potential violations, sanctions including dismissal. (Recommendation)

 Checking the references given by potential employers is one of the recommended procedures for
compliance.

 Testing employers of actual violations by other employees is not a recommended procedure.

 Informing employees of actual violations by other employees is not a recommended procedure.

 Circumstances of Bankruptcy does not compromise professional conduct / reputation of member,

hence its not a violation.

 Attempting to pass a bad cheque is a violation.

 Convicted of misdemeanor traffic offense is not a violation.

Recommended Procedures
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 Develop a code/policy
 Have a list of violations
 Have a system of obtaining employee references