Ethics, Code of Ethics, Standards of Conduct | CFA

Gromo Referal

Ethics is the study of moral principles, which can be described as the study of good and bad behavior or the study of making good choices as opposed to bad choices.


Some of the important terms associated with ethics are:

  • Trust is defined as a strong belief in the reliability of a person or institution
  • Ethics encompasses a set of moral principles and rules of conduct that provide guidance for our behavior
  • Beliefs are assumptions or thoughts we hold to be true
  • A principle is defined as a belief or fundamental truth that serves as the foundation for a system of belief or behavior or a chain of reasoning
  • Moral principles or ethical principles are beliefs regarding what is good, acceptable, or obligatory behavior and what is bad, unacceptable, or forbidden behavior.
  • Ethical principles may refer to beliefs regarding behavior that an individual expects of himself or herself, as well as shared beliefs regarding standards of behavior expected or required by a community or societal group
  • Ethical actions are those actions that are perceived as beneficial and conforming to the ethical expectations of society. Telling the truth about the risks or costs associated with a recommended investment, for example, is an ethical action. Telling the truth builds trust with customers and clients and enables them to make more informed decisions, which should lead to better outcomes for them and higher levels of client/customer satisfaction for you and your employer
  • Laws and regulations are rules of conduct specified by a governing body, such as a legislature or a regulator, identifying how individuals and entities under its jurisdiction should behave in certain situations

Code of Ethics

Specific communities or societal groups in which we live and work sometimes codify their beliefs about obligatory and forbidden conduct in a written set of principles, often called a code of ethics. The Code of Ethics communicates the organization’s principles, values, and expectations. The code of ethics communicates the shared principles and expected behaviors of its members. The code of ethics informs and provides some assurance to the public that the profession’s members will use their specialized skills and knowledge in service of others.

Standards of Conduct

The standards of conduct serve as benchmarks for the minimally acceptable behavior of community members and can help clarify the code of ethics.

Standards of Professional Conduct

The Standards of Professional Conduct outline minimally acceptable behaviors expected of all CFA Institute members and candidates. These standards may be principle based or rule based.

  • Rule- based standards are often narrowly defined, applying to specific groups of individuals in specific circumstances.
  • Principle- based standards, such as those of CFA Institute, apply to all candidates and members at all times regardless of title, position, occupation, geographic location, or specific situation. The CFA Institute Code and Standards are an example of principle- based standards; they are based on the shared principles of honesty, integrity, transparency, diligence, and placing client interests first

Job vs Vocation vs Profession

  • A job is very simply the work someone does to earn a living.
  • A vocation is a job or occupation to which someone is particularly well suited and is very dedicated.
  • A profession is the ultimate evolution of an occupation, resulting from the efforts of members practicing the occupation at a high level and creating a set of ethics and standards of conduct for the entire group

Characteristics of Profession

The profession is:

  • based on specialized knowledge and skills
  • based on service to others
  • practiced by members who share and agree to adhere to a common code of ethics.

Customer vs Client

  • A customer purchases goods or services in a single transaction or series of transactions and pays for each transaction or series of transactions.
  • A client enters into an ongoing relationship with a professional, hiring the professional to use his or her special knowledge for the benefit of the client, usually for a fee. The relationship between client and professional is based on trust rather than transactions.

Attributes of Investment Manager

The important attributes of investment manager are:

  • He has transparent and open business practices
  • He takes responsible actions to address an issue or crisis
  • He has ethical business practices

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