Sunday, November 13, 2011

Ethics in Financial Analysis an introduction for the CFA exams

This post will talk about ethics for the CFA.


These are some important strategy sets which you need to understand to practice ethics:
  1. Reading LOS verbatim is important.
  2. GIPS is tricky to read, its about performance presentations.. therr are few aspects and play of words here and there
  3. Answers are diplomatic means they never ask you to go extreme
  4. Typical question of IB vs research
  5. Leaving a job and joining new
  6. Encourage people to make info public
  7. Don't exaggerate in your reports, any kind of exaggeration is wrong 
  8. Soft dollar allowed, but paying your CFA fee form the money of research is not allowed
  9. Most tricky are when there is something we do in exchange for soft dollar like research that benefits the clients we have and cause no personal benefits 
  10. Investment bank vs research / brokerage cells and how one person can avoid conflicts
  11. Leaving a company and how to act in the last month, access to old data of the company and copying and taking data and contacting old clients
  12. Disclose vs dont do, when in doubt dont do vs when in doubt disclose 
  13. Fair dealing with all.. implied meaning in short words  
  14. Avoiding situation of controversy like vocal or oral permission  
  15.  GIPs: definition of firm asset should include all fee paying and non fee paying, discretionary and non-discretionary accounts
  16. GIPs: composite must include all fee-paying discretionary accounts. non-fee paying can be added if disclosed. non-discretionary cannot be added
There are many cases in the book which you can study, I will point out the interesting things in this subject.
Two interesting areas which are there which will fascinate you are: you can receive soft dollar & Mosaic Theory.
There are around 35-40 questions which will open your mind given in the books.

GIPS: Broad overview, 10 key characteristic, disclosures, compliance

1 comment:

  1. For BAT:

    1) MNPI and Market Manipulation

    2) Conflict of Interest: Disclosures Priority and Fees

    3) Buy side, sell side, chinese walls precautions.

    4) IB relation and research relation, IB wants to please compnay, research want to say company is useless. Research publishes buy sell hold for various companies whereas IB does a v diff thing. Bank goes and ask people to busy somethign so that they get commissions.

    5) Mosaic theory.








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