CFA Level III Preparation

Welcome to CFA Level III Preparation. We will study Ethics at Level III: Applying the Standards of Professional Conduct and the Asset Manager Code, work through an example, and practise using the course's learning material. Independent preparation support for CFA Level III Preparation, with original study notes, practice and revision. Certification/qualification requirements remain governed by the relevant professional body. Sign in and use the study header to open your authorised course. Select this published lesson. Start Course Tutor with Auto audio on: it teaches continuously, answers a typed question, then resumes. The Standards most tested in portfolio management. I(A) Knowledge of the Law: follow the stricter of applicable law and the Code and Standards. Where they conflict, the Standards apply unless the law prohibits compliance. A member who knows of a violation must dissociate from it. Case 1: oversubscribed issue. Arjun manages 40 discretionary accounts. His firm receives a small allocation of a popular new issue that is suitable for 25 accounts. Arjun gives the entire allocation to his five largest fee-paying accounts and to his own personal account because "the issue is small and splitting it is costly". Analysis: Standard III(B) Fair Dealing is violated because suitable clients were treated unequally. Standard VI(B) Priority of Transactions is violated because he participated personally when client demand was not filled. Correct action: allocate pro rata to all 25 accounts for which the issue is suitable, subject to a documented minimum lot size, and exclude his own account. Which mistake would change the reasoning in this example? 1. Saying "the law allows it, so it is fine". Where the Standards are stricter, the Standards govern. Check both. 2. Identifying the sponsor as the client of a pension fund. The duty of loyalty runs to the plan's participants and beneficiaries. Ask Course Tutor: please explain this step from the example. Analysis: Standard III(B) Fair Dealing is violated because suitable clients were treated unequally. Why does it follow? Add what you tried, so the explanation addresses your difficulty. Now try the source practice. A manager trades for his own account before executing a large client order in the same stock. Which Standard is violated? Pause before the answer. The source answer is: Standard VI(B) Priority of Transactions; client orders must be executed before personal trades (and the conduct may also amount to front-running). Compare your reasoning as well as the result. If your response differs, return to the worked example and identify the step that needs correction. Explain the key idea in your own words, revisit any mistaken step, then continue to the next lesson. Use Stop to end Course Tutor when you finish.