Ethical and Professional Standards

Ethical and Professional

Standards
Guidance for Standards I - VII

Ethical and Professional Standards

Standard I:
Professionalism

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Standard I: Professionalism

Standard I(A) Knowledge of the Law

Understand and comply with all laws, rules,
and regulations (including Code and Standards)
of any government, regulatory agency, or
association governing professional activities
Comply with more strict law, rule, and regulation
Do not knowingly assist in violation, otherwise
dissociate from activity
© Kaplan, Inc.

Standard I: Professionalism

Standard I(A) - Knowledge of the Law

Guidance
 Most strict
 First, notify supervisor or compliance
 May confront wrongdoer directly
 Dissociate if necessary
 Inaction may be construed as participation
 No requirement to report violations to
governmental authorities, may be appropriate in
certain cases
© Kaplan, Inc.

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Standard I: Professionalism

Standard I(A) - Knowledge of the Law

Recommended Procedures
Keep informed, regularly review written
compliance procedures, maintain files
Seek compliance/legal advice as needed
Encourage firms to adopt code of ethics

© Kaplan, Inc.

Standard I: Professionalism

Standard I(A) - Knowledge of the Law

Recommended Procedures
Distribute information internally on applicable
laws and regulations
Have written procedures for reporting
suspected violations
Members strongly encouraged to report
violations by other members
© Kaplan, Inc.

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Standard I: Professionalism

Standard I(B) - Independence and Objectivity

Use reasonable care, judgment to achieve and
maintain independence in professional activities
Do not offer, solicit, or accept any compensation
that could compromise independence or
objectivity

© Kaplan, Inc.

Standard I: Professionalism

Standard I(B) - Independence and Objectivity

Guidance
Modest gifts okay
Distinguish between gifts from clients and gifts from
entities trying to influence a member’s behavior
May accept gift from clients—disclose to
employer—get permission if for future performance

© Kaplan, Inc.

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Standard I: Professionalism

Standard I(B) - Independence and Objectivity

Guidance
Members responsible for hiring outside managers
should not accept travel, gifts, or entertainment that
could impair their objectivity
Investment banking relationships—do not bow to
pressure to issue favorable research
For issuer-paid research, flat fee structure is
preferred; must disclose
© Kaplan, Inc.

Standard I: Professionalism

Standard I(B) - Independence and Objectivity

Guidance
Members working for credit rating firms should
avoid influence by issuing firms
Users of credit ratings should be aware of this
potential conflict
Best practice is for analysts to pay for their own
commercial travel to firms being analyzed or to
firm events
© Kaplan, Inc.

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Standard I: Professionalism

Standard I(B) - Independence and Objectivity

Recommended Procedures
 Protect integrity of opinions—reports should
reflect unbiased opinion
 Create a restricted list
 Restrict special cost arrangements
 Limit gifts; clear value limits by firm
 Be careful with IPO share allocations
© Kaplan, Inc.