{"id":40297,"date":"2024-08-13T17:42:24","date_gmt":"2024-08-13T17:42:24","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=40297"},"modified":"2024-08-13T17:43:10","modified_gmt":"2024-08-13T17:43:10","slug":"the-general-principles-of-conduct-and-the-asset-manager-code-of-professional-conduct-2","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/the-general-principles-of-conduct-and-the-asset-manager-code-of-professional-conduct-2\/","title":{"rendered":"The General Principles of Conduct and the Asset Manager Code of Professional Conduct"},"content":{"rendered":"<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/yzUbaEZi65s\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Responsibilities to Clients<\/h2>\n<p>The following is an excerpt from the 2022 CFA Institute Curriculum:<\/p>\n<p>The following are the responsibilities of managers to their clients. A manager must:<\/p>\n<ol type=\"1\">\n<li>Be professional and ethical at all times.<\/li>\n<li>Focus on the client&#8217;s benefit, not their own.<\/li>\n<li>Be independent and objective.<\/li>\n<li>Be as skilled, competent, and diligent as possible.<\/li>\n<li>Be timely and accurate in communicating with clients.<\/li>\n<li>Comply with all capital market regulations.<\/li>\n<\/ol>\n<h2>Asset Manager Code of Professional Conduct<\/h2>\n<p>The following is an excerpt from the 2022 CFA Institute Curriculum:<\/p>\n<ol type=\"A\">\n<li><strong>Loyalty to Clients<\/strong>\n<p>Managers must:<\/p>\n<ol type=\"1\">\n<li>Put client interests first.<\/li>\n<li>Always seek the confidentiality of client information.<\/li>\n<li>Not receive gifts that could be expected to affect their independence, objectivity, or loyalty to clients within a reasonable manner.<\/li>\n<\/ol>\n<\/li>\n<li><strong>Investment Process and Actions<\/strong>\n<p>Managers must:<\/p>\n<ol type=\"1\">\n<li>Invest client assets prudently and carefully.<\/li>\n<li>Not manipulate capital markets.<\/li>\n<li>Treat clients fairly, not favoring any one client unnecessarily.<\/li>\n<li>Always make investment decisions based on sound research and reasoning.<\/li>\n<li>When managing a portfolio or pooled fund according to a specific mandate, strategy, or style:\n<ol type=\"a\">\n<li>Invest assets by observing the relevant portfolio goals and limitations.<\/li>\n<li>Allow clients to weigh investment decisions themselves by providing useful and relevant information.<\/li>\n<\/ol>\n<\/li>\n<li>When managing separate accounts and before providing investment advice or taking investment action on behalf of the client:\n<ol type=\"a\">\n<li>Evaluate and understand the client\u2019s investment objectives, tolerance for risk, time horizon, liquidity needs, financial<br \/>\n         constraints, any unique circumstances (including tax considerations, legal or regulatory constraints, etc.), and any other<br \/>\n          relevant information that would affect investment policy.<\/li>\n<li>Only use investments suitable for each particular client.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<li><strong>Trading<\/strong>\n<p>Managers must:<\/p>\n<ol type=\"1\">\n<li>Not use insider information to gain an unfair advantage over other market participants.<\/li>\n<li>Invest first for the benefit of the client, and then a manager may invest for the benefit of themselves.<\/li>\n<li>Use commissions generated from client trades for their benefit.<\/li>\n<li>Use the best possible brokerage services only in an attempt to benefit the client.<\/li>\n<li>Establish policies relating to fair client trades.<\/li>\n<\/ol>\n<\/li>\n<li><strong>Risk Management, Compliance, and Support<\/strong>\n<p>Managers must:<\/p>\n<ol type=\"1\">\n<li>Develop comprehensive investment policies meant to comply with not only the coding standards but also all local regulations.<\/li>\n<li>Hire a competent compliance manager.<\/li>\n<li>Analyze and assess the validity of any information used as a research input.<\/li>\n<li>Maintain appropriate records.<\/li>\n<li>Thoroughly investigate, analyze, implement, and monitor investments through the use of qualified staff only.<\/li>\n<li>Have a written business continuity plan.<\/li>\n<li>Institute a comprehensive and firmwide risk management process to protect against unnecessary loss.<\/li>\n<\/ol>\n<\/li>\n<li><strong>Performance and Valuation<\/strong>\n<p>Managers must:<\/p>\n<ol type=\"1\">\n<li>Managers should never report false performance.<\/li>\n<li>Use fair-market prices to value client assets.<\/li>\n<\/ol>\n<\/li>\n<li><strong>Disclosures<\/strong>\n<p>Managers must:<\/p>\n<ol type=\"1\">\n<li>Keep clients up to date with accurate, honest, and timely communications.<\/li>\n<li>Keep compliant communications readable, understandable, and honest.<\/li>\n<li>Ensure clients can understand communications by including all relevant information (key facts must be included).<\/li>\n<li>Disclose the following:\n<ol type=\"a\">\n<li>Conflicts of interests.<\/li>\n<li>Regulatory or disciplinary action going against the manager.<\/li>\n<li>All information regarding lock-up periods, strategies, risk factors, and use of derivatives and leverage.<\/li>\n<li>Management fees and other investment costs, and how clients may calculate those costs themselves.<\/li>\n<li>The use of any soft or bundled commissions.<\/li>\n<li>The performance of clients\u2019 investments on a regular and timely basis.<\/li>\n<li>All valuation methods and formulae.<\/li>\n<li>Shareholder voting policies.<\/li>\n<li>Trade allocation policies.<\/li>\n<li>Results of the review or audit of the fund or account.<\/li>\n<li>Significant personnel or organizational changes that may have occurred (loss of a key executive, for example).<\/li>\n<li>Details regarding the risk management processes of the firm.<\/li>\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>\u2003<\/p>\n<blockquote>\n<h2>Question<\/h2>\n<p>Which of the following is an <em>incorrectly<\/em> stated item from Part B (Investment Process and Actions) of the Asset Manager Code of Professional Conduct?<\/p>\n<ol type=\"A\">\n<li>Use reasonable care and prudent judgment when managing client assets.<\/li>\n<li>Not engage in practices designed to distort prices or artificially inflate trading volume with the intent to mislead market participants.<\/li>\n<li>Deal fairly and objectively with all clients when providing investment information.<\/li>\n<\/ol>\n<p><strong>Solution:<\/strong><\/p>\n<p><strong>The correct answer is C.<\/strong><\/p>\n<p>Choice C is incomplete in that it leaves out:<\/p>\n<p><em>&#8220;making investment recommendations, or taking investment action&#8221;<\/em><\/p>\n<p>The full bullet point from the Code reads as follows:<\/p>\n<p>&#8220;Deal fairly and objectively with all clients when providing investment information, making investment recommendations, or taking investment action.&#8221;<\/p>\n<p>Both choices, A and B are the full and correct portion of Part B of the Asset Manager Code of Professional Conduct.\n<\/p>\n<\/blockquote>\n<p><strong>Ethical and Professional Standards: Learning Module 4: Asset Manager Code of Professional Conduct;<\/strong> Los 4(b) Explain the ethical and professional responsibilities required by the six General Principles of Conduct of the Asset Manager Code<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Responsibilities to Clients The following is an excerpt from the 2022 CFA Institute Curriculum: The following are the responsibilities of managers to their clients. A manager must: Be professional and ethical at all times. Focus on the client&#8217;s benefit, not&#8230;<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[571],"tags":[],"class_list":["post-40297","post","type-post","status-publish","format-standard","hentry","category-cfa-level-iii","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The General Principles of Conduct and the Asset Manager Code of Professional Conduct - CFA, FRM, and Actuarial Exams Study Notes<\/title>\n<meta name=\"description\" content=\"Develop comprehensive investment policies meant to comply with not only the coding standards but also all local regulations.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/the-general-principles-of-conduct-and-the-asset-manager-code-of-professional-conduct-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The General Principles of Conduct and the Asset Manager Code of Professional Conduct - 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