Standard I(D) – Misconduct

Members and Candidates shall not engage in any professional activity that involves dishonesty, fraud, or deception or act in a way that harms their professional reputation, integrity, or competence.

This does not apply to legal violations stemming from acts of civil disobedience in favor of personal convictions if the member’s professional reputation, integrity, or competence are not harmed.

Application 1: Civil Disobedience

Courney Isaiah, CFA, is an investment analyst at XAS investments. Courney is a member of Protect Environment Organization, which champions environmental protection. In his free time, Courney organizes a march to protest the government’s increase in the use of fossil fuels and environmental degradation. During the protest, Courney was arrested and fined €2,000.  In the contract signed with XAS investments, any employee arrested for committing offenses within the company is immediately terminated.

Under the CFA Institute  Code and Standards, the Courney’s actions:

1. violated the CFA Institute Code and Standards because she violates her employment contract.
2. does not violate the CFA Institute Code and Standards.
3. violates the CFA Institute Code and Standards because she was arrested and fined.

Solution

The correct answer is B.

The analyst has not violated the CFA Institute Code and Standards by organizing a march to protest the government’s actions. The CFA code and standards on misconduct do not apply to legal violations stemming from acts of civil disobedience in favor of personal convictions if the member’s professional reputation, integrity, or competence are not harmed.

A is incorrect. Employers may have the right to terminate an employee’s employment contract if they get a criminal record, but this is at the employer’s discretion. Organizing a public assembly to protest personal convictions does not constitute a violation of the CFA Institute Code and Standards.

 C is incorrect. Organizing a public assembly to protest personal convictions does not constitute a violation of the CFA Institute Code and Standards.

Application 2: Fraud and Deceit

An equity analyst includes a receipt that is not part of his expenses for a company trip. He previously missed out on a legitimate expense of the same value the month before. He is looking to be reimbursed for the previous month’s expenses.

Is the analyst in conflict with Standard I(D) – Misconduct?

1. No, because the reimbursement he is seeking is of the same monetary value as his legitimate expense.
2. Yes, because his conduct is deceitful.
3. Yes, because he is not allowed to claim any expenses.

Solution

The correct answer is B. 

The analyst has violated Standard I(D) – Misconduct because his actions were deceitful. His actions have adversely damaged his integrity.

Application 3: Personal Actions and Integrity

Jane Ferro is the Head of Trading at Nix Brokerage. In her spare time, she is an avid woman’s rights activist. She was recently arrested at a peaceful protest over the weekend. She is accused of creating public disruption.

Are Ferro’s actions considered to violate Standard I(D) – Misconduct?

1. Yes, Ferro’s arrest questions her professionalism.
2. No, the crime Ferro is accused of is not serious enough to damage her reputation.
3. No, her actions do not reflect poorly on her professional reputation and integrity.

Solution

The correct answer is C.

Standard I(D) – Misconduct is meant to cover conduct that reflects poorly on a member’s or Candidate’s professional reputation, integrity, or competence. Ferro is allowed to participate in causes that she aligns with.

LOS 3(a): Evaluate practices, policies, and conduct relative to the CFA Institute Code of Ethics and Standards of Professional Conduct.

LOS 3(b): Explain how the practices, policies, or conduct does or does not violate the CFA Institute Code of Ethics and Standards of Professional Conduct.