Standard VII—Responsibilities as a CFA Institute Member or CFA Candidate (Ethics and Standards of Practice Module 7)

Candidates

-are prohibited from disclosing confidential information or material gained during the exam process. This includes but is not limited to -specific details of questions appearing on the exam, and -broad topical areas and formulas tested (or not tested) on the exam. -must comply with all testing policies. -can express personal opinions about the CFA Program and exams as long as they do not disclose content- specific information, including exam questions and subject matter either covered or not covered on the exam.

Members

-are prohibited from disclosing confidential material related to the exam and grading processes to those outside of the CFA exam development process. -outside of the CFA exam development or grading process are prohibited from soliciting confidential material related to the exam and grading processes. -are expected to demonstrate the same level of confidentiality when assisting or participating in any CFA Institute-sponsored educational program.

Members involved in developing, administering, or grading the CFA exam are prohibited from sharing which of the following? I. Deliberations related to the exam process II. Information related to the scoring of the questions III. Questions appearing on the exam or under consideration

1,2,&3 C is correct. Members involved in developing, administering, or grading the exams cannot share • questions appearing on the exam or under consideration, • deliberations related to the exam process, and • information related to the scoring of questions.

You can use the CFA designation after I. passing all three levels of the CFA exam. II. completing the required years of acceptable work experience. III. completing and submitting a Professional Conduct Statement. IV. paying applicable CFA Institute membership dues.

1,2,3&4 -C is correct. CFA charterholders are those individuals who have earned the right to use the CFA designation granted by CFA Institute. They have satisfied certain requirements, including completion of the CFA Program and required years of acceptable work experience. Once granted the right to use the designation, individuals must also satisfy the CFA Institute membership requirements to maintain their right to use the CFA designation.

AJ: Joining us today are Steve Lewis, leader of the Level I study group, and Donna Khadri, who will be leading the Level II study group. Both have some great suggestions for those preparing to sit for Levels I and II this June. Let's begin with Steve. Steve: Thanks, AJ. The exam was more difficult than I imagined, even after I studied for at least 250 hours. Finding a balance between studying, working, and your personal life is going to be difficult, but if you set up a study plan, it will definitely make the next four months easier. I posted the study plan that I used on the discussion forum, and you are welcome to use it as you see fit. I also started a discussion thread where I posted some questions from the December exam that I thought were challenging. I did this because some of the people who failed the Level I exam last June posted the questions that they felt were challenging, and I found this information to be very helpful when I started studying for Level I. It helped me to get a sense of what was required in certain topic areas. You should do the same thing after you take your exam. I'll share more of my experiences and recommendations on the discussion forum, but definitely, if you ever have any questions, please feel free to stop by my office. Did Steve violate Standard VII?

C is correct. The CFA Program prohibits candidates from disclosing confidential information or material gained during the exam process. Examples of information that cannot be disclosed by candidates sitting for an exam include but are not limited to • specific details of questions appearing on the exam, and • broad topical areas and formulas tested or not tested on the exam.

Standard VII(A): Conduct as Participants in CFA Institute Programs

Candidates and members are prohibited from disclosing confidential information about the exam, including specific details about questions on an exam. broad topical areas and formulas tested and not tested on an exam. exam development, administration, and grading details. Candidates and members, however, are free to express a personal opinion as long as it does not disclose confidential information.

Candidates are not prohibited from disclosing which of the following when sitting for a CFA exam?

Curriculum material A is correct. Standard VII(A) does not prohibit candidates from discussing curriculum material with others or in study groups in preparation for the exam. Among other things, candidates must not disclose broad topical areas and formulas tested or not tested on the exam.

Donna: Like the others, I'll share more of my experiences on the discussion forum. Nicola, would you like to talk to the group about how to refer to their participation in the CFA Program? Nicola: Definitely. Thank you, Donna. For those who don't know me, I'm Nicola Mitty from the Human Resources department. One of my responsibilities in Human Resources is to assist employees enrolled in the CFA Program. First, I'd like to wish everyone the best of luck on your exams. I hear it's a grueling experience, but I can assure you that the effort you're putting into it is worth it. I'm happy to provide whatever support and guidance that I can. Today, I'd like to focus on how you should refer to your participation in the CFA Program in your professional profile and on your business cards. Please take a moment to review this handout. Now that you have feedback to provide Nicola so that she can correct her handout, which of the following actions can she take to ensure that the bank refers to the CFA designation in a manner that is consistent with the Code and Standards? Use a template that has been created by your firm's compliance department if it is consistent with Standard VII(B) Provide written information to your firm's compliance department on the CFA Institute Code and Standards Ensure that the firm's written compliance procedures provide adequate guidance about what is permissible conduct under the Code and Standards

D is correct. (I) You can use a template that has been approved by your firm's compliance department as long as it is consistent with Standard VII(B). (II) To reduce misuse of the CFA designation or improper reference to it, you should disseminate written information about Standard VII(B) and the accompanying guidance to the firm's legal, compliance, public relations, and marketing departments. (III) Ensure that your firm's policies provide adequate guidance about what is permissible conduct under the Code and Standards.

Which of the following is a correct use of the CFA designation and registered CFA marks?

I am a Level III candidate in the CFA Program. -C is correct. Candidates in the CFA Program may refer to their participation in the CFA Program, but the reference must clearly state that the individual is a candidate in the CFA Program and must not imply that the candidate has achieved any type of partial designation. The Chartered Financial Analyst and CFA marks must always be used either after a charterholder's name or as adjectives (never as nouns). For example, to refer to oneself as "a CFA" or "a Chartered Financial Analyst" is improper.

Which of the statements should not be made when referring to CFA Institute, the CFA designation, or the CFA Program?

I expect to receive my Chartered Financial Analyst designation in 2013 -C is correct. Members and candidates may make claims about the relative merits of CFA Institute, the CFA Program, or the Code and Standards, as long as those statements are implicitly or explicitly stated as the opinion of the speaker. Candidates must never state or imply that they have a partial designation as a result of passing one or more levels of the exam or cite an expected completion date of any level of the CFA Program. If a candidate passes each level of the exam in consecutive years, and wants to state that he/she did so, that is not a violation of the Standard VII(B).

Standard VII(B): Reference to CFA Institute, the CFA Designation, and the CFA Program

Members and candidates must not misrepresent or exaggerate the meaning of the CFA designation, membership in CFA Institute, or candidacy in the CFA Program. This standard applies to any form of communication. should disseminate written information about Standard VII(B) and the accompanying guidance to their firm's legal, compliance, public relations, and marketing departments. should encourage their firms to create templates that are approved by a central authority (such as the compliance department) as being consistent with Standard VII(B). must properly use CFA marks.

Steve: AJ, before I forget, I want to thank you for helping me out with the society's annual dinner. As the Program Chair, I am happy to report it was a huge success. AJ: Not a problem. I can't believe we didn't think about that before! I mean, it only makes sense to ask our investment banking clients to be keynote speakers at society lunches and dinners. It not only increases their visibility, it makes it easier for us to recommend their securities to potential investors. In addition, it saves the Program Committee a lot of time and effort in finding speakers. All they have to do is contact my administrative assistant and tell him the investment topic that they want the speaker to discuss. Because we have relationships with so many large corporations and financial institutions, my assistant has always been able to find a client who can speak on the requested topic as well as talk about their company. Steve: I have to admit that I was getting nervous. The annual dinner is a popular and well-attended event. AJ: Thankfully our clients like to talk - they would never turn down an invitation to speak! How are you going to top this event? Now's the time to be nervous. Steve: Well, I learned that when you ask someone to speak at an event, it never hurts to solicit some financial support from them for that particular event. Did you hear that each investment banking client who spoke provided some financial support for the event? It's almost too good to be true how well this event played out. Did Steve violate Standard VII in his role as Program Chair of the annual dinner?

Steve has not violated Standard VII by asking a firm client to speak at the annual dinner as a one-time practice even though both the firm and the client may have benefited. Additionally, soliciting financial support for the dinner from event speakers is not a violation. These individual actions do not compromise the reputation of CFA Institute or the CFA Institute Programs. However, should Steve follow AJ's advice to solely use firm clients for all future society events, then he will be in violation of the Standard. Through only using his clients, Steven would be benefiting himself and his firm in a manner that compromises the integrity of CFA Institute.

AJ: I hope the information that we share with you today is helpful as you prepare for the CFA exam. I am going to be honest with you, the exams are tough. But we're here to help you in any way that we can. For those of you who recently passed Level III, please help answer questions about the exams on our discussion forum. The rest of the group could really benefit from your insights and experiences. Those of you taking the Level III exam in June, you'll want to pay particular attention to their comments and recommendations. Additionally, as a grader of the Level III exam, I can tell you that you must read the essay questions carefully and only answer the question being asked. Your study guide happens to contain the behavioral finance essay question I graded last year, and you would not believe some of the ridiculous answers that candidates provided. My grading team spent hours developing the guideline answers, and in the end, most candidates only received 3 out of the 15 points allotted because they did not answer the question being asked. Please don't let this happen to you. Did AJ's comments violate Standard VII?

Yes, he disclosed information related to the scoring of the question. C is correct. AJ should not have disclosed information related to a specific question on the exam, such as which question he graded or the number of points most candidates received.

Steve: Donna, do you want to speak about your experience with the Level II exam? Donna: Sure. I'd like to follow up on Steve's suggestion about developing a study plan. I found that having a plan really helped me to manage my time. I hope that based on my experience in the CFA Program—I passed Level II last year—that you'll know where to focus your studies. For example, most people tell you to ignore ethics, that it's easy and you'll get the questions right without even studying. Trust me, this is not true. Make sure that you study Standards III, V, and VI. Not only are they the most complicated, but they are also the ones that are most relevant to our jobs. Oh, and you should memorize the DuPont formula and definitely know how to apply it. My exam had at least five questions on it. I could go on and on and on... I guess that's why we have the discussion forum! Did any of Donna's comments violate Standard VII?

Yes, her comments about the DuPont formula -C is correct. The CFA Program prohibits candidates from disclosing confidential material gained during the exam process. Examples of information that cannot be disclosed by candidates sitting for an exam include but are not limited to specific details of questions appearing on the exam, and broad topical areas and formulas tested or not tested on the exam.