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ETHICS
IN PRACTICE
ETHICS IN INVESTMENT MANAGEMENT CASEBOOK
ETHICS IN PRACTICE
This book is a collection of 100 Ethics in Practice cases originally published on-line by CFA Institute
over the course of two years. Since October 2017, at the beginning of each week, CFA Institute
published a short vignette on the CFA Institute Members App asking readers to use their ethical
decision-making skills to review the facts and choose the best response to a multiple-choice
question. At the end of the week, after readers had a chance to analyze the situation, choose a
response, and post their response and reasoning, CFA Institute published the analysis providing an
analysis of the case and the correct response. These cases are drawn from real-world circumstances,
regulatory enforcement actions, CFA Institute Professional Conduct investigations, and facts
submitted by CFA Institute members and volunteers.
This Ethics in Practice casebook is a great resource for continued professional learning (each case
qualifies for 0.25 CE/SER credit) or for use in classroom discussions. It gives you an opportunity to
“exercise” your ethical decision-making skills. Just as you need to practice to become proficient at
playing a musical instrument, public speaking, or playing a sport, working through the scenarios in
this book will allow you to develop your skill at assessing and analyzing investment-related situations
and making ethical decisions. We encourage you to assess the cases through the lens of the CFA
Institute Code of Ethics and Standards of Professional Conduct and to apply the CFA Institute Ethical
Decision-Making Framework.
ETHICS IN PRACTICE
Ethics in Investment Management Casebook
© 2019 CFA Institute. Second Edition, October 2019.
All rights reserved. You may copy and distribute the individual cases in this book, but not the book in its entirety, and without
modification and for non-commercial purposes, provided you attribute the content to CFA Institute and retain this copyright
notice. These cases were written as a basis for discussion and is not prescriptive of how a business situation or professional
conduct matter should or should not be handled or addressed. Certain characters mentioned are fictional to facilitate
discussion, and any resemblance to actual persons is coincidental.
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CFA , Chartered Financial Analyst , CIPM , Claritas and GIPS are just a few of the trademarks owned by CFA Institute.
To view a list of the CFA Institute trademarks and the Guide for Use of the CFA Institute Marks, please visit our website at
www.cfainstitute.org
CONTENTS
Code and Standards i
Ethical Decision-Making Framework ii
Billing and Fees 08
CFA Institute 24
Client Advice 31
Client Relationships 40
Disclosures 57
Documentation 81
Employment Issues 90
Error Correction 105
Investments and Trading 112
Outside Activities 150
Performance Reporting 162
Personal Trading 175
Promotion and Marketing 184
Research 198
Supervisory Responsibility 219
Cases Listed by Standard 235
CODE OF ETHICS
AND STANDARDS OF
PROFESSIONAL CONDUCT
PREAMBLE
The CFA Institute Code of Ethics and Standards of Professional Conduct are fundamental to the values of CFA Institute and essential to achieving
its mission to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the
ultimate benefit of society igh ethical standards are critical to maintaining the public’s trust in financial marets and in the investment profession
Since their creation in the s, the Code and Standards have promoted the integrity of CFA Institute members and served as a model for meas
uring the ethics of investment professionals globally, regardless of ob function, cultural differences, or local las and regulations All CFA Institute
® ®
members including holders of the Chartered Financial Analyst CFA designation and CFA candidates must abide by the Code and Standards
and are encouraged to notify their employer of this responsibility iolations may result in disciplinary sanctions by CFA Institute Sanctions can
include revocation of membership, revocation of candidacy in the CFA Program, and revocation of the right to use the CFA designation
THE CODE OF ETHICS
embers of CFA Institute including CFA charterholders and candidates for the CFA designation “embers and Candidates” must
• Act ith integrity, competence, diligence, respect and in an • Practice and encourage others to practice in a professional and
ethical manner ith the public, clients, prospective clients, ethical manner that ill reflect credit on themselves and the
employers, employees, colleagues in the investment profession, profession
and other participants in the global capital marets • Promote the integrity and viability of the global capital marets for
• Place the integrity of the investment profession and the interests the ultimate benefit of society
of clients above their on personal interests • aintain and improve their professional competence and strive
• se reasonable care and exercise independent professional udg to maintain and improve the competence of other investment
ment hen conducting investment analysis, maing investment professionals
recommendations, taing investment actions, and engaging in
other professional activities
STANDARDS OF PROFESSIONAL CONDUCT
I. PROFESSIONALISM
A. Knowledge of the Law. embers and Candidates must under C. Meeentaton. embers and Candidates must not noingly
stand and comply ith all applicable las, rules, and regulations mae any misrepresentations relating to investment analysis,
including the CFA Institute Code of Ethics and Standards of recommendations, actions, or other professional activities
Professional Conduct of any government, regulatory organia D. Mondt. embers and Candidates must not engage in any
tion, licensing agency, or professional association governing professional conduct involving dishonesty, fraud, or deceit or
their professional activities In the event of conflict, embers and commit any act that reflects adversely on their professional repu
Candidates must comply ith the more strict la, rule, or regula tation, integrity, or competence
tion embers and Candidates must not noingly participate
or assist in and must dissociate from any violation of such las, II. INTERIT OF CAPITAL MARKETS
rules, or regulations A. Mateal Nonl Info
aton. embers and Candidates ho
B. Indeendene and Oett . embers and Candidates must possess material nonpublic information that could affect the
use reasonable care and udgment to achieve and maintain inde value of an investment must not act or cause others to act on the
pendence and obectivity in their professional activities embers information
and Candidates must not offer, solicit, or accept any gift, benefit, B. Maet Manlaton. embers and Candidates must not engage
compensation, or consideration that reasonably could be expected in practices that distort prices or artificially inflate trading volume
to compromise their on or another’s independence and obectivity ith the intent to mislead maret participants
© 9 CFA Institute
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