Lessons
- Seven Standards of Professional Conduct
- Standard I (A) Professionalism - Knowledge of the Law
- Standard I (B) Professionalism - Independence and Objectivity
- Standard I (C) Professionalism - Misrepresentation
- Standard I (D) Professionalism - Misconduct
- Standard II (A) - Material Non-public Information
- Standard II (B) - Market Manipulation
- Standard III (A) - Loyalty, Prudence, and Care
- Standard III (B) - Fair Dealing
- Standard III (C) - Suitability
- Standard III (D) - Performance Presentation
- Standard III (E) - Preservation of Confidentiality
- Standard IV (A) - Loyalty
- Standard IV (B) - Additional Compensation Arrangements
- Standard IV (C) - Responsibilities of Supervisors
- Standard V (A) - Diligence and Reasonable Basis
- Standard V (B) - Communication with Clients and Prospective Clients
- Standard V (C) - Record Retention
- Standard VI (A) - Disclosure of Conflicts
- Standard VI (B) - Priority of Transactions
- Standard VI (C) - Referral Fees
- Guidance for Standard VII – Responsibilities of a CFA Institute Member or CFA Candidate
Standard VI (C) - Referral Fees
This standard states that if a member receives any referral fees (compensation or benefit) for recommending a product or service, he must disclose it to the concerned people such as employer and clients.
Examples of Violation
- Example 1: A manager working for a bank has an arrangement with a brokerage firm, where the brokerage firm gives him a referral fee for every person to open an account with the brokerage firm. The manager refers several of his bank clients to the brokerage firm. However, he does not disclose this arrangement to his bank. This is a violation of the standard.
- Example 2: An investment firm’s trading desk conducts its business with a variety of brokers. The portfolio manager in that firm tells the trading desk to direct a large portion of its trades to one of his friend’s brokerage firm. The brokerage firm in return of this favour, recommends the investment firm’s advisory services to its own clients. This arrangement is not disclosed to the portfolio manager’s firm or to the clients of the brokerage house. This is a violation of the law.
Related Downloads
Finance Train Premium
Accelerate your finance career with cutting-edge data skills.
Join Finance Train Premium for unlimited access to a growing library of ebooks, projects and code examples covering financial modeling, data analysis, data science, machine learning, algorithmic trading strategies, and more applied to real-world finance scenarios.
I WANT TO JOINJOIN 30,000 DATA PROFESSIONALS
Free Guides - Getting Started with R and Python
Enter your name and email address below and we will email you the guides for R programming and Python.