I. PROFESSIONALISM

D. Misconduct.

Members and Candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit, or commit any act that reflects adversely on their professional reputations, integrity, or competence.

Members and candidates shall not compromise the integrity of the CFA designation, or the integrity or validity of the CFA examinations.

Standard I (A) states the obligation to comply with all applicable laws and regulations. This standard addresses personal behavior that will reflect poorly on the profession as a whole. Any act that involves lying, cheating, stealing, or other dishonest conduct, if the offence reflects adversely on a member or candidate's professional (not personal) activities, would violate the standard.

Procedures for compliance

Members and candidates should encourage their employers to:

• Adopt a Code of Ethics to which every employee must subscribe. Make clear that any personal behavior that reflects poorly on the individual involved, the institution as a whole, or the investment industry will not be tolerated.
• Disseminate to all employees a list of potential violations and associated disciplinary sanctions, up to and including dismissal from the firm.
• Conduct background checks on potential employees to ensure that they are of good character and not ineligible to work in the investment industry because of past infractions of the law.

Example 1

An investment advisor executes excessive trading volume to generate fees. He tells clients that the high level of trading in their discretionary accounts is needed to maintain proper diversification. If this statement is misrepresentative, the advisor is clearly engaging in professional misconduct.

Example 2

A portfolio manager has three martinis at lunch and returns to the office to resume his regular duties. If the manager's judgment is impaired and he is engaging in investment decision-making activities, he is in violation of this standard.