Buffl
Buffl
CAIA Level 1

01 - Ethics

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von dkjfhdk K.

What should you do when laws and rules conflict?


(Professionalism, Standard I(A) – Knowledge of the Law)

  1. Follow the stricter rule

  2. If the law is stricter, follow the law

  3. If the Code of Standards is stricter, follow the Code


Can you break the law if the Code allows it?


(Professionalism, Standard I(A) – Knowledge of the Law)

  • No, never break the law

  • Always follow both the law and the Code

  • The stricter one always applies


How to stay compliant with the law?


(Professionalism, Standard I(A) – Procedures for Compliance)

  1. Learn and review all relevant laws regularly

  2. Ask legal/compliance experts if unsure

  3. Stay away from illegal or suspicious activities


Can you accept gifts from clients or partners?


(Professionalism, Standard I(B) – Independence and Objectivity)

  1. Only if the gift doesn’t affect your judgment

  2. Never accept gifts that create bias or pressure

  3. Maintain fairness and objectivity


How to protect your objectivity at work?


(Professionalism, Standard I(B) – Procedures for Compliance)

  1. Follow company rules on gifts and entertainment

  2. Use a restricted list to avoid conflicts

  3. Limit contact with clients who try to influence you

  4. Get approval before accepting gifts


What counts as misrepresentation?


(Professionalism, Standard I(C) – Misrepresentation)

  1. Lying or hiding facts

  2. Giving false performance info

  3. Using someone else's work without credit

  4. Making misleading statements


What is misconduct in finance?


(Professionalism, Standard I(D) – Misconduct)

  1. Dishonest behavior

  2. Fraud or illegal acts

  3. Actions that harm your professional reputation

  4. Reckless behavior also counts


What is material nonpublic information (MNPI), and how should you act?


(Professionalism, Standard II(A) – Material Nonpublic Information)

  • MNPI is info that can affect a stock’s price and is not public

  • Do not trade or tell others to trade using MNPI

  • Be careful when using expert opinions or research


How can firms prevent MNPI misuse?


(Professionalism, Standard II(A) – Procedures for Compliance)

  1. Share material info with the public first

  2. Use firewalls between departments

  3. Limit access to sensitive info

  4. Train staff and keep records


What is market manipulation?


(Professionalism, Standard II(B) – Market Manipulation)


  1. Don’t lie or fake trading volume

  2. No false info to push prices

  3. No fake trades to trick the market

  4. Real trades in low-volume markets are okay


What does “loyalty, prudence, and care” mean for clients?


(Professionalism, Standard III(A) – Loyalty, Prudence, and Care)

  1. Always put the client’s interest first

  2. Act carefully and wisely

  3. Avoid conflicts and tell clients if they exist


What must firms do to protect clients’ interests?


(Professionalism, Standard III(A) – Procedures for Compliance)

  1. Send account updates often

  2. Keep client assets separate

  3. Know clients’ goals and needs

  4. Follow laws and act fairly

  5. Review investments regularly


What is fair dealing?


(Professionalism, Standard III(B) – Fair Dealing)

  1. Treat all clients the same

  2. Share advice with everyone at the same time

  3. Don’t give special treatment

  4. Explain allocation of trades


How do firms stay fair with clients?


(Professionalism, Standard III(B) – Procedures for Compliance)


  1. Create rules on how to share recommendations

  2. Share updates with everyone equally

  3. Keep track of who gets what info

  4. Let clients know the services offered


How do you know if an investment is suitable for a client?


(Professionalism, Standard III(C) – Suitability)

  1. Know the client’s goals, risk, and situation

  2. Check if the investment fits their full portfolio

  3. Update info often

  4. Don’t act without checking suitability


How to prepare for suitability checks?


(Professionalism, Standard III(C) – Procedures for Compliance)

  1. Write down goals, risks, and constraints

  2. Update info once a year

  3. Test if portfolio fits client’s needs

  4. Use Investment Policy Statement (IPS)


What makes a good performance presentation?


(Professionalism, Standard III(D) – Performance Presentation)

  • Be fair, clear, and accurate

  • Don’t promise future returns

  • Explain if data is limited

  • Disclose all details honestly


How to ensure performance is reported correctly?


(Professionalism, Standard III(D) – Procedures for Compliance)

  • Follow GIPS standards

  • Know your audience

  • Use composite data from real portfolios

  • Keep records, even for closed accounts


When can you share a client's confidential info?


(Professionalism, Standard III(E) – Preservation of Confidentiality)

  1. If the client breaks the law

  2. If the law requires it

  3. If the client gives permission


How to protect client confidentiality at work?


(Professionalism, Standard III(E) – Procedures for Compliance)

  1. Only share info with those working for the client

  2. Follow or suggest privacy rules

  3. Review how info is protected

  4. Ask clients how they prefer their info shared


Can you accept extra gifts or pay from someone else?(


Professionalism, Standard IV(B) – Additional Compensation Arrangements)

  1. Only if your employer agrees in writing

  2. Don’t let it conflict with your employer’s interest

  3. Always report it fully


How to stay loyal to your employer?


(Professionalism, Standard IV(A) – Loyalty)

  1. Don’t harm your employer’s business

  2. Keep work info private

  3. Get consent for outside jobs

  4. Put clients first but respect your employer


How to follow loyalty rules at work?


(Professionalism, Standard IV(A) – Procedures for Compliance)

  1. Know your company’s policies

  2. Follow rules on leaving or competing

  3. Report incidents properly

  4. Clarify your employment type


What are supervisors responsible for?


(Professionalism, Standard IV(C) – Responsibilities of Supervisors)

  1. Watch over others to prevent rule-breaking

  2. Detect any issues early

  3. Set up proper supervision systems


How can supervisors stay compliant?


(Professionalism, Standard IV(C) – Procedures for Compliance)

  1. Give a clear code of ethics

  2. Use simple, separate documents

  3. Train staff about compliance

  4. Set up fair incentives


What are key parts of an adequate compliance system?


(Professionalism, Standard IV – Duties to Employers)

  1. Write procedures clearly and simply

  2. Assign a compliance officer

  3. Define roles and responsibilities

  4. Check and document how procedures work

  5. Educate and monitor employees

  6. Take quick action when violations occur


How long must investment records be kept?


(Professionalism, Standard V(C) – Records Retention)

  1. At least 7 years (if no local rule)

  2. Records belong to the firm

  3. Includes digital and written records

  4. Based on the analyst’s role


How do you keep good records?


(Professionalism, Standard V(C) – Procedures for Compliance)

  1. Firms must keep all client-related documents

  2. Keep communication about investments

  3. Maintain clear records for reports and decisions


What is required for making investment decisions?


(Professionalism, Standard V(A) – Diligence and Reasonable Basis)

  • Use good judgment and careful research

  • Rely on solid data, not just opinions

  • Use internal or third-party research

  • Document your thinking clearly


How should firms check investment recommendations?


(Professionalism, Standard V(A) – Procedures for Compliance)

  1. Set clear rules for when advice is ready to be shared

  2. Write steps for doing due diligence

  3. Test and review research quality

  4. Review data and third-party services often


How to communicate investment ideas to clients?


(Professionalism, Standard V(B) – Communication with Clients and Prospective Clients)

  1. Explain your process and any changes

  2. Be clear about risks and limits

  3. Say what's fact and what's opinion

  4. Present info in a simple and honest way


How can analysts stay compliant when sharing reports?


(Professionalism, Standard V(B) – Procedures for Compliance)

  1. Keep backup for all reports

  2. Follow firm policies when sharing info

  3. Encourage firms to set up a review system


What should you disclose about referral fees?


(Professionalism, Standard VI(C) – Referral Fees)

  • Tell clients and employers about any compensation for referrals

  • Let them know about costs and possible bias

  • Disclose amount, type, and approval process


How to stay compliant with referral fee rules?


(Professionalism, Standard VI(C) – Procedures for Compliance)

  1. Create a clear referral fee policy

  2. Get approval before paying or receiving referral fees

  3. Tell clients about all referral compensation

  4. Report referral payments to firm every quarter


What must you disclose about conflicts of interest?


(Professionalism, Standard VI(A) – Disclosure of Conflicts)

  1. Disclose anything that affects your objectivity

  2. Use plain, clear language

  3. Update if things change

  4. Include roles, ownership, and department overlap


How to handle conflict disclosures in practice?


(Professionalism, Standard VI(A) – Procedures for Compliance)

  1. Tell clients about possible compensation conflicts

  2. If your firm won’t allow disclosure, consider not taking the client

  3. Add compensation info to reports and promotions

  4. Disclose performance fees and options


Whose trades come first—clients, firm, or yours?


(Professionalism, Standard VI(B) – Priority of Transactions)

  1. Clients always come first

  2. Employer trades come second

  3. Personal trades are last

  4. Avoid conflicts and front-running


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