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Ethics - Coggle Diagram
Ethics
Standards + application
Duties to Clients
Fair Dealing
Investment recommendation
Investment actions
"fairly" - "equally"
Loyalty, Prudence and Care
Soft commission policies
Proxy voting policies
Actual Investment Client
Develop the client's portfolio
General understanding
Suitability
Understand the client's risk profile
What is suitability?
Developing an Investment Policy Statement
Performance Presentation
Preservation of Confidentiality
Duties to Employers
IV(B): Additional compensation Arrangements
Do not accept compensation from the third party that can create conflict with the employer's interest unless get written consent
IV(C): Responsibilities of Supervisors
Effective compliance system
Policies and procedures
Review of employee conduct
Code of ethics
Education and traning programs
An appropriate incentive structure
Supervision including detection
Written compliance procedures
Periodic review
Requirements
Create appropriate compliance system
Ensure procedures are monitored
Anticipate misconduct actions
Detect and prevent violations
IV(A): Loyalty
Employer responsibilities
Independent practice
Overall requirements
Leaving an employer
Whistleblow
Nature of employment
Integrity of Capital Markets
Material Nonpublic Information
Material information
Non public information
Trading on trading
Front running
Firewalls
Star analysts/ Industries experts
Mosaic theory
Market Manipulation
Information based
Pump and dump
Wash trade
Trading based
Pump and dump
Spoofing
Layering
Bear raiding
Wash trade
Investment Analysis, Recommendations and Actions
Communication with clients and prospective clients
Informing clients of the investment process
Identifying risks and limitations
Basic requirements
Disclose significant risks and limitations
Communicate to clients factors that important
Disclose the basic format and general principles
Distinguish fact-opinion
Report representations
Distinction between "facts" and "opinion"
Record Retention
Diligence and Reasonable basis
Using secondary or third-party research
Put reasonable effort in verifying the reliability of the research before using
Using quantitative oriented research
Understand parameters
Understand assumptions and limitations
Basic requirements
Diligence
Exercise diligence, independence, thoroughness
Consideration of using the resources for making analysis
Reasonable basis
Put reasonable effort to find evidence support recommendation
Developing quantitative oriented techniques
Selecting external advisers and sub-advisers
I(A): Professionalism
Independence and Objectivity
Must not affect others'
Some problems
Sell-side analysts, buy-side
Research paid by
Rating agencies
Travel funding
Achieve and maintain independence and objectivity
Knowledge of the Law:
When conflict
Follow stricter rules
How to act when being aware of violation?
Dissociate from the violation
Bring the violation to counsel
Encouraged to report
Comply with applicable laws
Applicable laws
Misrepresentation
Omission of facts
Mistatements
Plagiarism
Misconduct
Stealing
Conflics of Interest
VI(B): Priority of transactions
VI(C): Referral fees
VI(A) Disclosure of conflicts
Disclosure to clients
Cross-departmental conflicts
Disclosure to employers
Conflicts with stock ownership
Conflicts as a Director
Introduction
Overview of investment industry
Functions
Flow of funds
Ethics in finance
Scandals of investment industry
Bernard Madoff
In 2008
Ponzi schemes
The need for standards of ethics
Ethical principles