Code of Ethics

Correct Answer: Politely decline the request, explaining that sharing confidential information would violate the CFA Institute Code of Ethics and Standards of Professional Conduct, regardless of the friend's promise to keep the information secret or share profits.

The best answer is to politely decline the request and explain that sharing confidential information would violate the CFA Institute Code of Ethics and Standards of Professional Conduct. This holds true regardless of the friend's promise to keep the information secret or share profits. As a CFA charterholder, David has a duty to maintain the confidentiality of his firm's research and to act with integrity. Sharing non-public information for personal gain or to benefit others is a clear violation of the Code and Standards. The other two options are incorrect because they suggest actions that go against the principles of the CFA Institute Code of Ethics and Standards of Professional Conduct: - Providing confidential information under any circumstances, even with a written agreement, is unethical and violates the duty of confidentiality. - Seeking an exception to the rules based on personal relationships or potential mutual benefit is inappropriate and undermines the integrity of the profession.

Correct Answer: Refuse to issue the report and escalate the matter to the appropriate compliance department or senior management.

The correct answer is to refuse to issue the report and escalate the matter to the appropriate compliance department or senior management. As a CFA charterholder, Jessica is bound by the CFA Institute Code of Ethics and Standards of Professional Conduct. These standards require her to act with integrity, competence, diligence, respect, and in an ethical manner. Issuing a report with material misstatements would violate these principles. Ignoring the misstatements and issuing a favorable report to secure an investment banking deal would prioritize the firm's financial interests over the integrity of the analysis and potentially mislead investors. This is a clear violation of the CFA Institute's ethical standards. Removing the misstatements from the report herself the issue would still result in a misleading report. Additionally, not disclosing the issue to her supervisor or compliance department would be a failure in her duty to uphold ethical standards within her firm. Therefore, the only appropriate course of action is for Jessica to refuse to issue the misleading report and escalate the matter through the proper channels in her firm to address the misstatements and the pressure from her supervisor.

Correct Answer: Disclose the error to the client, provide a detailed explanation of the impact on the portfolio, and offer a plan to rectify the situation, while complying with the firm's error correction procedures.

The most appropriate course of action for James is to disclose the error to the client, provide a detailed explanation of the impact on the portfolio, and offer a plan to rectify the situation, while complying with the firm's error correction procedures. As a CFA charterholder, James is bound by the CFA Institute Code of Ethics and Standards of Professional Conduct, which emphasizes the importance of acting with integrity, competence, diligence, and respect. This includes the duty to communicate with clients in a timely and accurate manner, and to place the interests of clients above his own. Adjusting the portfolio's asset allocation to improve performance and compensate for the analytical error without disclosing it to the client would be a breach of trust and violate the principles of transparency and honesty. Similarly, attributing the underperformance to general market volatility and external factors while reassuring the client that the long-term investment strategy remains sound would be misleading and fail to address the actual cause of the underperformance. Therefore, the most ethical and professional approach is to promptly inform the client of the error, take responsibility for its impact, and work with the client to develop a plan to correct the situation in accordance with the firm's error correction procedures.