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Annotation 1332230098188

B. Independence and Objectivity.
#analyst-notes #guidance-for-standards-i-vii #professionalism
Procedures for compliance

Members should follow certain practices and should encourage their firms to establish certain procedures to avoid violations of this standard.

  • Protect integrity of opinions. Members and their firms should establish policies stating that every research report on issuers by a corporate client reflects the unbiased opinion of the analyst. Firms should also design compensation systems that protect the integrity of the investment decision process by maintaining the independence and objectivity of analysts.

  • Create a restricted list. If the senior managers at a member's firm are unwilling to permit dissemination of adverse opinions about a corporate client, the firm should remove the controversial company from the research universe and put it on a restricted list so that the firm disseminates only factual information about the company.

  • Restrict special cost arrangements. When attending meetings at an issuer's headquarters, a member should pay for commercial transportation and hotel charges. No corporate issuer should reimburse a member for transportation. Members should encourage issuers to limit the use of corporate aircraft to situations in which commercial transportation is not available or in which efficient movement could not otherwise be arranged. Members should take particular care that when frequent meetings are held between an individual issuer and an individual member the issuer is not always the host of the member.

  • Limit gifts. Members should limit the acceptance of gratuities and/or gifts to token items. The standard does not preclude customary, ordinary, business-related entertainment so long as its purpose is not to influence or reward members.

  • Review procedures. Members should implement (or encourage their firms to implement) effective supervisory and review procedures to ensure that analysts and portfolio managers comply with policies relating to their personal investment activities.
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Subject 2. Standard I (B) Independence and Objectivity
travel anywhere in Europe. Steve fails to disclose receiving this package to his supervisor. Steve has violated the standard because accepting these perks, worth more than $100, may hinder his independence and objectivity. <span>Procedures for compliance Members should follow certain practices and should encourage their firms to establish certain procedures to avoid violations of this standard. Protect integrity of opinions. Members and their firms should establish policies stating that every research report on issuers by a corporate client reflects the unbiased opinion of the analyst. Firms should also design compensation systems that protect the integrity of the investment decision process by maintaining the independence and objectivity of analysts. Create a restricted list. If the senior managers at a member's firm are unwilling to permit dissemination of adverse opinions about a corporate client, the firm should remove the controversial company from the research universe and put it on a restricted list so that the firm disseminates only factual information about the company. Restrict special cost arrangements. When attending meetings at an issuer's headquarters, a member should pay for commercial transportation and hotel charges. No corporate issuer should reimburse a member for transportation. Members should encourage issuers to limit the use of corporate aircraft to situations in which commercial transportation is not available or in which efficient movement could not otherwise be arranged. Members should take particular care that when frequent meetings are held between an individual issuer and an individual member the issuer is not always the host of the member. Limit gifts. Members should limit the acceptance of gratuities and/or gifts to token items. The standard does not preclude customary, ordinary, business-related entertainment so long as its purpose is not to influence or reward members. Review procedures. Members should implement (or encourage their firms to implement) effective supervisory and review procedures to ensure that analysts and portfolio managers comply with policies relating to their personal investment activities. <span><body><html>



Annotation 1332268633356

Misrepresentation
#analyst-notes #guidance-for-standards-i-vii
Example 1

Your prospective client is unsure whether to contract with you for services. You mention that investment decisions are made by a team of five professionals, each a CFA charterholder, and that this is an above-average level of expertise for a firm of this size and should lead to superior investment performance. However, even if individuals holding CFA charters make decisions, you cannot infer that this will lead to superior performance. If you can substantiate the superior level of expertise among managers in your firm, then that part of your statement is okay.

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Subject 3. Standard I (C) Misrepresentation
attributing the research to its specific source. Presents a firm's own research to clients, prospects and the general public: NOT a violation as the member does not need to attribute the source specifically in this case. <span>Example 1 Your prospective client is unsure whether to contract with you for services. You mention that investment decisions are made by a team of five professionals, each a CFA charterholder, and that this is an above-average level of expertise for a firm of this size and should lead to superior investment performance. However, even if individuals holding CFA charters make decisions, you cannot infer that this will lead to superior performance. If you can substantiate the superior level of expertise among managers in your firm, then that part of your statement is okay. Example 2 An analyst calls himself a "portfolio management specialist." In fact, the analyst is just a trainee. The analyst violates the standard for misrep



Annotation 1332270992652

#analyst-notes #guidance-for-standards-i-vii
Example 3

A firm advertises that investors can increase their returns by investing in money market funds rather than municipal funds. The firm doesn't mention that this statement is not true for investors in the highest tax bracket. The firm, therefore, violates the standard because the advertisement predicts performance for all investors without distinguishing the impact on investors in the highest tax bracket.
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Subject 3. Standard I (C) Misrepresentation
Example 2 An analyst calls himself a "portfolio management specialist." In fact, the analyst is just a trainee. The analyst violates the standard for misrepresenting his or her qualifications. <span>Example 3 A firm advertises that investors can increase their returns by investing in money market funds rather than municipal funds. The firm doesn't mention that this statement is not true for investors in the highest tax bracket. The firm, therefore, violates the standard because the advertisement predicts performance for all investors without distinguishing the impact on investors in the highest tax bracket. Example 4 Kevin is the president of Shapiro Inc., an investment relations company. Kevin contracts with six publicly traded companies to electronically promote their