A Detailed Application and Best Practices Guide
Members must understand and comply with all applicable laws, rules, and regulations of any country, government, or regulatory body governing their professional activities. In the event of a conflict, you must always follow the more strict law or standard. You must not knowingly participate or assist in any violation.
When laws conflict with the CFA Standards, follow whichever is stricter. If uncertain about legal requirements, seek competent legal advice and document your efforts to comply.
Members must use reasonable care and judgment to achieve and maintain independence and objectivity. You must not offer, solicit, or accept any gift, benefit, or compensation that could reasonably be expected to compromise your own or another's independence and objectivity.
Accepting expensive gifts from clients, allowing investment banking relationships to influence research recommendations, or receiving compensation tied to specific investment outcomes.
Members must not knowingly make any misrepresentations relating to investment analysis, recommendations, or other professional activities. This includes plagiarism and guaranteeing investment performance.
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.
Members who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.
Information is material if its disclosure would probably have an impact on the price of a security or if reasonable investors would want to know the information before making an investment decision.
Members must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.
Pump and dump schemes, wash trading, spreading false rumors, or coordinating trades to create artificial price movements.
Members have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. You must act for the benefit of your clients and place their interests before your employer's or your own interests.
When conflicts arise between client and employer interests, the client's interests take priority. However, members should attempt to resolve conflicts through disclosure and discussion.
Members must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, or taking investment action.
When in an advisory relationship with a client, members must make a reasonable inquiry into the client's circumstances and constraints, and then determine if an investment is suitable. You must judge the suitability of investments in the context of the client's total portfolio.
Consider: client's investment experience, risk tolerance, return objectives, time horizon, liquidity needs, tax considerations, and any unique circumstances or constraints.
When communicating investment performance information, members must make reasonable efforts to ensure that it is fair, accurate, and complete.
Members must keep information about current, former, and prospective clients confidential unless the information concerns illegal activities, disclosure is required by law, or the client permits disclosure.
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, divulge confidential information, or otherwise cause harm.
Members may prepare to leave their employer (update resumes, interview) but must not breach their duty of loyalty by soliciting clients or taking proprietary information.
Members must not accept gifts, benefits, or compensation that competes with, or might create a conflict of interest with, their employer's interest unless they obtain written consent from all parties involved.
Members must make reasonable efforts to ensure that anyone subject to their supervision or authority complies with applicable laws, rules, regulations, and the Code and Standards.
Establish adequate compliance systems, delegate supervision only to qualified personnel, and take prompt action when violations are detected.
Members must exercise diligence, independence, and thoroughness in analyzing investments, making recommendations, and taking action. You must have a reasonable and adequate basis, supported by research, for any analysis, recommendation, or action.
Thorough investigation, independent analysis, proper documentation, and ongoing monitoring of recommendations and portfolio actions.
Members must disclose to clients the basic format and general principles of their investment processes. You must use reasonable judgment in identifying which factors are important to your analyses and include those in communications with clients. Distinguish between fact and opinion.
Members must develop and maintain appropriate records to support their investment analyses, recommendations, actions, and other investment-related communications with clients.
Maintain records of research sources, analysis methodology, recommendation rationale, and client communications. Follow firm policies or applicable regulations for retention periods.
Members 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 clients, prospective clients, and their employer.
Ownership positions, board memberships, employment relationships, family connections, or any other situation that might bias your judgment or recommendations.
Investment transactions for clients and employers must have priority over investment transactions in which a member is the beneficial owner.
Members must disclose to their employers, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from, or paid to, others for the recommendation of products or services.
Disclosure must be made before entering into any formal agreement and should include the nature and estimated dollar value of any benefits.
Members must not engage in any conduct that compromises the reputation or integrity of CFA Institute or the CFA designation or the integrity, validity, or security of CFA Institute programs.
This includes not sharing exam questions, not violating exam policies, and not engaging in misconduct during the exam process.
When referring to CFA Institute, CFA Institute membership, the CFA designation, or candidacy in the CFA Program, members must not misrepresent or exaggerate the meaning or implications of membership in CFA Institute, holding the CFA designation, or candidacy in the CFA Program.
Correct: "John Smith, CFA" or "Jane Doe is a CFA candidate." Incorrect: Implying the designation guarantees investment success or using "CFA" as a noun.