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Introduction to the Standards of Professional Conduct

Introduction to the Standards of Professional Conduct. The Standards of Professional Conduct.

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Introduction to the Standards of Professional Conduct

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  1. Introduction to the Standards of Professional Conduct

  2. The Standards of Professional Conduct Members are expected to know what is required by the Code and Standards with respect to:I. ProfessionalismII. Integrity of MarketsIII. Duties to Clients and Prospective ClientsIV. Duties to EmployersV. Analysis, Recommendations, and ActionVI. Conflicts of InterestVII. Responsibilities as professional

  3. The Standards of Professional Conduct • Standard I: Professionalism Standard I consist of four subsections: • I-A: Knowledge of the Law • I-B: Independence and Objectivity • I-C: Misrepresentation • I-D: Misconduct

  4. The Standards of Professional Conduct • Standard I-A: Knowledge of the Law Members must understand and comply with all applicable laws, rules, and regulations of any government, regulatory organization, licensing agency, or professional association governing their professional activities. • In the event of conflict, Members must not knowingly participate or assist in and must disassociate from any violation of such laws, rules, or regulations.

  5. The Standards of Professional Conduct • Rule of Thumb: • When applicable law is stricter than the Code and Standards, members must adhere to applicable law. If conduct is governed by local laws that are less strict than the Standards, members and candidates must adhere to the Code and Standards.

  6. The Standards of Professional Conduct • Standard I-B: Independence and Objectivity • Members must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. • Members 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.

  7. The Standards of Professional Conduct • Standard I-B: Independence and Objectivity • Pressures from Other Departments • Modest Gifts are OK. • Distinguish gifts from Clients and Companies

  8. The Standards of Professional Conduct • Standard I-C: Misrepresentation • Members must not knowingly make any misrepresentations relating to analysis, recommendations, actions, or other professional activities. • Qualification • Marketing Material • Self or Firm’s services and performance

  9. The Standards of Professional Conduct • Standard I-C: Misrepresentation • Plagiarism • Putting your name on another author’s research report. • Including a large portion of another author's report in your own (either verbatim or with slight modifications) without crediting the original author.

  10. The Standards of Professional Conduct • Standard I-D: Misconduct • Members 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.

  11. The Standards of Professional Conduct • Standard II: Integrity of Markets • Standard II consists of two subsections: • II-A: Material Nonpublic Information • II-B: Market Manipulation

  12. The Standards of Professional Conduct • Standard II-A: Material Nonpublic Information • Members who possess material nonpublic information that could affect the value of a product must not act or cause others to act on the information.

  13. The Standards of Professional Conduct • Standard II-B: Market Manipulation • Members must not engage in practices that distort prices with the intent to mislead market participants. Transaction-Based ManipulationDisseminating False Information

  14. The Standards of Professional Conduct • Standard III: Duties to ClientsStandard III consists of five subsections: • III-A: Loyalty, Prudence, and Care • III-B: Fair Dealing • III-C: Suitability • III-D: Performance Presentation • III-E: Preservation of Confidentiality

  15. The Standards of Professional Conduct • Standard III-A: Loyalty, Prudence and Care • Members have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. • Members must act for the benefit of their clients and place their clients' interests before their employer's or their own interests. • In relationships with clients, Members must determine applicable fiduciary duty and must comply with such duty.

  16. The Standards of Professional Conduct • Standard III-B: Fair Dealing • Members must deal fairly and objectively with all clients when providing analysis, recommendations, taking action, or engaging in other professional activities.

  17. The Standards of Professional Conduct • Standard III-C: Suitability • 1.When Members are in an advisory relationship with a client, they must:a) make a reasonable inquiry into a client's or prospective client's requirements and update him regularly.

  18. The Standards of Professional Conduct • Standard III-D: Performance Presentation • When communicating performance information, Members must make reasonable efforts to ensure the information is fair, accurate and complete. Misrepresenting Performance Records - Some of the Tricks • Selective Areas • Selective Time Frame

  19. The Standards of Professional Conduct • Standard III-E: Preservation of ConfidentialityMembers must keep information about current, former and prospective clients confidential unless: • the information concerns illegal activities on the part of the client or prospective client, • disclosure is required by law, or • the client or prospective client permits disclosure of this information.

  20. The Standards of Professional Conduct • Standard IV: Duties to Employers • Standard IV consists of three subsections: • Standard IV-A: Loyalty • Standard IV-B: Additional Compensation Arrangements • Standard IV-C: Responsibilities of Supervisors

  21. The Standards of Professional Conduct • Standard IV-A: Loyalty In matters related to their employment, Members 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.

  22. The Standards of Professional Conduct • Standard IV-B: Additional Compensation ArrangementsMembers and 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.

  23. The Standards of Professional Conduct • Standard IV-C: Responsibilities of SupervisorsMembers must make reasonable efforts to detect and prevent violations of applicable laws, rules, regulations, and the Code and Standards by anyone subject to their supervision or authority.

  24. The Standards of Professional Conduct • Standard V: Analysis, Recommendations and Action Standard V has three subsections: • Standard V-A: Diligence and Reasonable Basis • Standard V-B: Communication with Clients and Prospective Clients •  Standard V-C: Record Retention

  25. The Standards of Professional Conduct • Standard V-A: Diligence and Reasonable BasisMembers must: 1. Exercise diligence, independence and thoroughness in analysis , recommendations and taking actions.  2. Have a reasonable and adequate basis, supported by appropriate research and investigation, for any analysis, recommendation or action.

  26. The Standards of Professional Conduct • Standard V-B: Communication with Clients and Prospective ClientsMembers must: • Disclose to clients and prospective clients the basic format and general principles of the processes used in industry or company and must promptly disclose any changes that might materially affect those processes.

  27. The Standards of Professional Conduct • Standard V-C: Record Retention • Members and Candidates must develop and maintain appropriate records to support their investment , recommendations, actions and other communications with clients and prospective clients.

  28. The Standards of Professional Conduct • Standard VI: Conflicts of Interest Standard VI contains three subsections: • Standard VI-A: Disclosure of Conflicts • Standard VI-B: Priority of Transactions • Standard VI-C: Referral Fees

  29. The Standards of Professional Conduct • Standard VI-A: Disclosure of ConflictsMembers 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. Members must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively.

  30. The Standards of Professional Conduct • Standard VI-B: Priority of Transactions • Transactions for clients and employers must have priority over transactions in which a Member is the beneficial owner.

  31. The Standards of Professional Conduct • Standard VI-C: Referral Fees Members 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.

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