Six Components of Code of Ethics

A CFA's in-depth technical knowledge about finance and financial markets is intertwined into a code of ethics which the CFA Institute considers sacrosanct. They enshrine the mission and values of the CFA Institute. CFA members are expected to practice this code of ethics in their daily professional duties. This Code of Ethics and Standard of Professional behavior was drawn out in the 1960s and has since then applied to CFA members the world over.

Professionals found violating this code can be sanctioned by the CFA Institute. They can have their membership suspended, revoked, and their designation revoked.

Trust between the client and the CFA professional is one of the important values in a client-analyst relationship. The CFA professional is expected to help put investor interest first and help navigate tricky gray areas in rules that present themselves. The Code of Ethics and Professional Conduct helps CFA practitioners by providing them with a clear guide on ethical and professional conduct. Let's take a look at the six points in the Code of Ethics.

The Code of Ethics

  1. Act with integrity, competence, respect and in an ethical manner with all stakeholders. (investors, public, colleagues).

  2. Place client and professional interests above personal interests.

  3. Exercise care and professional judgment when dispensing professional advice, analysis, actions and other professional activities.

  4. Practice and encourage fellow professionals to maintain ethical standards and thus bring credit to the analyst community.

  5. Promote the integrity and feasibility of the global capital markets.

  6. Improve and maintain professional competence of themselves and their association.

Violations of the Code of Ethics can present themselves in a variety of forms. This is a summary of such violations.

A professional's improper conduct makes their competence and intentions look suspect. Excessive fraternization, drinking during the day or any behavior that impairs professional decision-making ability is considered a violation.

Defrauding the employer with deceit and fraud is considered a clear violation of the code of ethics. This raises questions about the integrity of the professional, which in turn diminishes trust.

Withholding information regarding the scope of the assignment and making wrongful financial claims is seen as a violation of professional conduct.

Harassing colleagues of any gender in any manner is seen as a violation of the code of ethics. The violator is breaking standards of integrity and professionalism while doing so.

Investment professionals can use the Code of Ethics as a touchstone for professional behavior. Firms can incorporate policies and procedures too to support the code of ethics.

  • Draw out and broadcast the code of ethics to all members of the firm. Relay the importance of maintaining a high professional standard of conduct for the individual and as a reflection of the company.

  • List out violations and the consequences of breaking the code of ethics.

  • Hire prospective employees based on referrals and do background checks to see if they comply with professional standards and have not broken any laws.

We can see that the CFA Institute holds the investment professional to the highest standard of professional conduct and the code of ethics is part of the core of its program. Professionals are expected to conduct their affairs within the framework of its Code of Ethics that protects the client and makes it easier for the professional to defend their actions should they come under scrutiny.

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