Shi H Park

872933676
FIN 3110-1
Standard I: Professionalism

IA. Knowledge of the Law

- Must know all the laws
o CFA Code of Conduct and other Code and Standards
o Applicable Law that governs your conduct such as federal regulations
o Abide by the stricter standard
- Must not knowingly do an illegal or unethical act
o Inaction with association => construed as participation
- If you recognize that there’s an unethical behavior
o Try to stop it
o If that fails, go talk to compliance
o If none of this works, dissociate from the firm
 Dissociate – Don’t participate with the firm
 Don’t write your name on the research reports
 Don’t take new clients
- To maintain knowledge of law
o Stay informed about the laws
o Review firm’s procedures regarding certain situations
o Maintain current files of applicable standards
IB. Independence and Objectivity
- Maintaining reasonable care and judgement to maintain independence and objectivity
o Don’t accept gifts that would compromise your integrity
- Create a guideline to make sure there are no grey lines for employees
- Compensation should not be linked to other revenue generating office such as
corporate finance team
IC. Misrepresentation
- Must not knowingly misrepresent investment analysis, recommendations, actions or
other professional activities
o Be honest about firm’s performance and investment’s risks/unpredictability
o Don’t plagiarize and perform due diligence on third party’s material
o Disclose external managers
IC. Misconduct
- Engaging in any lies that that compromise one’s professional reputation
o Distinguish because your personal reputation does not matter
 Must be related to a professional matter such as research
 However, personal issues that has a business element (ex – hiding assets
in bankruptcy) will be misconduct
 Shi H Park
872933676
FIN 3110-1
Standard II: Integrity of Capital Markets

IIA. Material Nonpublic Information

- Material Information – any information a reasonable investor would like to know before
investing; this information will affect security’s price
o Based on how specific, difference in public information, reliability, and effect
- Nonpublic – not disseminated/made available to all market participants
o Become public when you distribute information through public channels
- Mosaic Theory – if conclusion derived from a combination of public information and
nonpublic, nonmaterial information, can use it to make investment recommendations
IIB. Market Manipulation
- Market Manipulation – Engaging in practices to distort prices or artificially inflate
trading volumes to mislead market participants and making profit
o Information-Based Manipulation – False rumors to induce others to trade
o Transaction-based Manipulation – Misleading market by taking actions to affect
security’s price (ex – having dominant position to exploit price)
 Matched Order – Person place buy and sell order at the same time on low
turnover security stocks to induce others to trade
 Washed Trade – Being the buyer and seller of the same security
- Volume manipulation has to be more than 20% of the volume to be have effect