Ethics

An investment fund manager has a finance degree and over 20 years of experience working for a top-ranking asset management firm. Based only on this information, could the investment fund manager most likely claim to be part of a profession? Yes, a person working in this industry requires specialized knowledge and skills. No. Yes, as part of the industry, he is providing a service to others.

B is correct. For the investment fund manager to claim he is part of a profession, the activity must be based on specialized knowledge and skills, must include service to others, and must be practiced by members who share and agree to adhere to a common code of ethics. Investment management is based on providing service to a firm's clients and also requires specialized knowledge and skills, but it would not be considered a profession unless there exists a common code of ethics among similar investment fund managers.

A code of ethics most likely plays an important part in establishing a profession because: clients are assured a standardized level of care from all industry professionals. customers rely heavily on ongoing specialized services to achieve their desired outcome. a client relationship is based on trust whereby the professional puts his or her client's interests first. Solution

C is correct. A code of ethics plays an important part in establishing a profession because a client relationship is based on trust, whereby the professional puts his or her client's interest first. The code enables a relationship to be established on the basis of trust, because clients rely heavily on the specialized knowledge and skills of professionals to achieve their goals. The code also requires the interests of the clients to be placed above those of the professional.

Q. Each composite of a GIPS-compliant firm must consist of: multiple portfolios. portfolios selected on an ex post basis. portfolios managed according to a similar investment strategy.

C is correct. A composite is an aggregation of one or more portfolios managed according to a similar investment mandate, objective, or strategy. For example, if a GIPS-compliant firm presents performance for a global equity composite (the composite), the composite must include portfolios that are managed, or have historically been managed, according to the firm's global equity strategy. A is incorrect because a composite is an aggregation of one or more portfolios managed according to a similar investment mandate, objective, or strategy. A composite may consist of a single portfolio when it is the only portfolio managed according to a particular mandate. B is incorrect because the determination of which portfolio(s) to include in a composite should be done according to pre-established criteria (ex ante basis), not after the fact (ex post basis).

Q. Townsend was recently appointed to the board of directors of a youth golf program that is the local chapter of a national not-for-profit organization. The program is beginning a new fund-raising campaign to expand the number of annual scholarships it provides. Townsend believes many of her clients make annual donations to charity. The next week in her regular newsletter to all clients, she includes a small section discussing the fund-raising campaign and her position on the organization's board. Townsend did not violate the Code and Standards. Townsend violated the Code and Standards by soliciting donations from her clients through the newsletter. Townsend violated the Code and Standards by not getting approval of the organization before soliciting her clients.

Solution Answer A is correct. Townsend has not provided any information about her clients to the leaders or managers of the golf program; thus, she has not violated Standard III(E)-Preservation of Confidentiality. Providing contact information about her clients for a direct-mail solicitation would have been a violation. Answer B is incorrect because the notice in the newsletter does not violate Standard III(E). Answer C is incorrect because the golf program's fund-raising campaign had already begun, so discussing the opportunity to donate was appropriate.

1) Professionalism a) knowledge of the law b) independence and objectivity --reasonable care and judgement; must not offer, solicit or accept any gifts c) misrepresentation d) misconduct

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