Page 23 - FINAL CFA II SLIDES JUNE 2019 DAY 1

MODULE 2.4: STANDARD III(A) READINGS 1 AND 2: CFA INSTITUTE CODE OF ETHICS AND STANDARDS OF
III Duties to Clients PROFESSIONAL CONDUCT GUIDANCE FOR STANDARDS I–VII
III (A) Loyalty, Prudence, and Care.

Clients come first: No fiduciary duty where one did not already exist, but you must always act in clients’ best interest and recommend products that are
suitable given their investment objectives and risk tolerances.
• Exercise the prudence, care, skill, and diligence under the circumstances that a person acting in a like capacity and familiar with such matters would use.
• Manage pools of client assets in accordance with the terms of the governing documents (e.g. IPS).
• Make investment decisions in the context of the total portfolio.
• Inform clients of any limitations in an advisory relationship (e.g., an advisor who may only recommend her own firm’s products).
• Vote proxies in an informed and responsible manner. Due to cost benefit considerations, it may not be necessary to vote all proxies.
• Client brokerage, or “soft dollars” or “soft commissions” must be used to benefit the client.
• The “client” may be the investing public as a whole rather than a specific entity or person.

Recommended Procedures of Compliance
1
Submit to clients, at least quarterly, itemized statements showing all securities in custody and all debits, credits, and transactions.

Encourage firms to address these topics when drafting policies and procedures regarding fiduciary duty:
1. Follow applicable rules and laws.
2. Establish investment objectives of client. Consider suitability of portfolio relative to client’s needs and circumstances, the investment’s basic
characteristics, or the basic characteristics of the total portfolio.
3. Diversify.
4. Deal fairly with all clients in regards to investment actions.
5. Disclose conflicts.
6. Disclose compensation arrangements.
7. Vote proxies in the best interest of clients and ultimate beneficiaries.
8. Maintain confidentiality.
9. Seek best execution.
10. Place client interests first.