Standard VII(A) Conduct as Participants in CFA Institute Programs Members and Candidates 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.
Members must not engage in any activity that undermines the integrity of the CFA charter. This Standard applies to conduct that includes:
Cheating on the CFA exam or any exam.
Revealing anything about either broad or specific topics tested, content of exam questions, or formulas required or not required on the exam.
Not following rules and policies of the CFA Program.
Giving confidential information on the CFA Program to candidates or the public.
Improperly using the designation to further personal and professional goals.
Misrepresenting information on the Professional Conduct Statement (PCS) or the CFA Institute Professional Development Program.
Members and candidates are not precluded from expressing their opinions regarding the exam program or CFA Institute but must not reveal confidential information about the CFA Program.
Candidates who violate any of the CFA exam policies (e.g., calculator, personal belongings, Candidate Pledge) have violated Standard VII(A).
Members who volunteer in the CFA Program may not solicit or reveal information about questions considered for or included on a CFA exam, about the grading process, or about scoring of questions.
Standard VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program
When referring to CFA Institute, CFA Institute membership, the CFA designation, or candidacy in the CFA Program, Members and Candidates must not misrepresent or exaggerate the meaning or implications of membership in CFA Institute, holding the CFA designation, or candidacy in the CFA Program.
Members must not make promotional promises or guarantees tied to the CFA designation, such as over-promising individual competence or over-promising investment results in the future (i.e., higher performance, less risk, etc.).
Members must satisfy these requirements to maintain membership:
Sign the PCS annually.
Pay CFA Institute membership dues annually.
If they fail to do this, they are no longer active members.
Do not misrepresent or exaggerate the meaning of the CFA designation.
There is no partial CFA designation. It is acceptable to state that a candidate successfully completed the program in three years if, in fact, he did, but claiming superior ability because of this is not permitted.
Recommendations for members
Members should be sure that their firms are aware of the proper references to a member’s CFA designation or candidacy, as errors in these references are common.
MODULE QUIZ 2.8, 2.9
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1. Daniel Lyons, CFA, is an analyst who covers several stocks, including Horizon Company. Lyons’s aunt owns 30,000 shares of Horizon. She informs Lyons that she has created a trust in his name into which she has placed 2,000 shares of Horizon. The trust is structured so that Lyons will not be able to sell the shares until his aunt dies, but may vote the shares. Lyons is due to update his research coverage of Horizon next week. Lyons should most appropriately:
A. update the report as usual because he is not a beneficial owner of the stock.
B. advise his superiors that he is no longer able to issue research recommendations on Horizon.
C. disclose the situation to his employer and, if then asked to prepare a report, also disclose his beneficial ownership of the shares in his report.
2. Kate Wilson, CFA, is an equity analyst. Wilson enters two transactions for her personal account. Wilson sells 500 shares of Tibon, Inc., a stock on which she currently has a “Buy” recommendation. Wilson buys 200 shares of Hayfield Co.
and the following day issues a research report on Hayfield with a “Buy”
recommendation. Has Wilson violated the Code and Standards?
A. No.
B. Yes, both of her actions violate the Code and Standards.
C. Yes, but only one of her actions violates the Code and Standards.
3. Hern Investments provides monthly emerging market research to Baker Brokerage in exchange for prospective client referrals and European equity research from Baker. Clients and prospects of Hern are not made aware of the agreement, but clients unanimously rave about the high quality of the research provided by Baker. As a result of the research, many clients with non-
discretionary accounts have earned substantial returns on their portfolios.
Managers at Hern have also used the research to earn outstanding returns for the firm’s discretionary accounts. Hern has most likely:
A. not violated the Code and Standards.
B. violated the Code and Standards by using third-party research in discretionary accounts.
C. violated the Code and Standards by failing to disclose the referral agreement with Baker.
4. After writing the Level III CFA exam, Cynthia White goes to internet discussion site CFA Haven to express her frustration. White writes, “CFA Institute is not doing a competent job of evaluating candidates because none of the questions in the June exam touched on Alternative Investments.” White most likely violated the Standard related to conduct as a candidate in the CFA program by:
A. publicly disputing CFA Institute policies and procedures.
B. disclosing subject matter covered or not covered on a CFA exam.
C. participating in an internet forum that is directed toward CFA Program participants.
5. After passing all three levels of the CFA exams on her first attempts and being awarded her CFA Charter, Paula Osgood is promoting her new money
management firm by issuing an advertisement. Which of these statements would most likely violate the Standard related to use of the CFA designation?
A. “To earn the right to use the CFA designation, Paula passed three exams
A. “To earn the right to use the CFA designation, Paula passed three exams covering ethics, financial statement analysis, asset valuation, and portfolio management.”
B. “Paula passed three 6-hour exams on her first attempts and is a member of her local investment analyst society.”
C. “Because of her extensive training, Paula will be able to achieve better investment results than managers who have not been awarded the CFA designation.”