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Key Information To Memorize For CFA Exam - Learning Module 1 - Ethics and Trust in The Investment Profession

The document outlines the importance of ethics in the investment profession, emphasizing that ethical behavior fosters trust and integrity in financial markets. It discusses the role of the CFA Institute in promoting high ethical standards and provides a framework for ethical decision-making to help professionals navigate ethical dilemmas. Key takeaways highlight the necessity of ethical conduct beyond legal requirements and the influence of situational factors on ethical behavior.

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Chris Richman
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13 views2 pages

Key Information To Memorize For CFA Exam - Learning Module 1 - Ethics and Trust in The Investment Profession

The document outlines the importance of ethics in the investment profession, emphasizing that ethical behavior fosters trust and integrity in financial markets. It discusses the role of the CFA Institute in promoting high ethical standards and provides a framework for ethical decision-making to help professionals navigate ethical dilemmas. Key takeaways highlight the necessity of ethical conduct beyond legal requirements and the influence of situational factors on ethical behavior.

Uploaded by

Chris Richman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1.

Ethics and Its Role in the Investment Profession


Definition of Ethics

Ethics is the study of moral principles and rules of conduct that help individuals
differentiate right from wrong. Ethical behavior fosters trust in financial markets and benefits
all stakeholders​

📝 Example: If a portfolio manager misleads clients about fund performance, it erodes


trust and can result in legal and reputational damage.

2. Professionalism in Investment Management


Investment professionals are expected to adhere to high ethical standards and uphold the
integrity of the financial system.

Characteristics of a Profession

A profession is an occupational group that requires specialized knowledge, adherence to


an ethical code, and a commitment to client service. The CFA Institute promotes investment
management as a profession by enforcing ethical behavior​

How Professions Establish Trust

Professions normalize behavior through ethical codes and best practices. This ensures
consistent client protection and market integrity​

3. Challenges to Ethical Behavior


Situational Influences on Ethics

Behavioral factors, such as social pressure, financial incentives, and personal gain, can
lead to ethical lapses. These are called situational influences​

4. CFA Institute as a Professional Body


The CFA Institute is the largest investment management professional body. It enforces high
ethical standards through the CFA Code of Ethics and Standards of Professional
Conduct, ensuring that members and candidates act with integrity and professionalism​

5. Ethical Decision-Making Framework


To help professionals resolve ethical dilemmas, the CFA Institute provides an ethical
decision-making framework.
Framework for Ethical Decision-Making

This structured process helps professionals analyze and resolve ethical issues by
considering:

1.​ Identifying relevant facts – Gather all material information.


2.​ Considering stakeholders – Determine who is affected.
3.​ Assessing duties and obligations – Align with ethical and professional
responsibilities.
4.​ Weighing situational influences – Identify personal or external pressures.
5.​ Making a decision and acting – Choose the best ethical course of action.
6.​ Reflecting on the outcome – Evaluate long-term consequences​

📝 Example: A financial advisor facing pressure to sell high-commission products should


consider client interests first and act in accordance with ethical guidelines.

6. Key Takeaways for the CFA Exam


✔ Ethics is central to the investment profession and ensures trust in capital markets.​
✔ Ethical behavior goes beyond legal requirements and focuses on fairness and
transparency.​
✔ The CFA Institute promotes ethics through the Code of Ethics and Standards of
Professional Conduct.​
✔ Investment professionals must be aware of situational influences that could lead to
ethical lapses.​
✔ The ethical decision-making framework helps professionals analyze and resolve
ethical dilemmas effectively​

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