CFA Program Curriculum 2017 Level III, Volumes 1 – 6

The same official curricula that CFA Program candidates receive with program registration is now publicly available for purchase. CFA Program Curriculum 2017 Level III, Volumes 1-6 provides complete, authoritative guidance on synthesizing the entire CFA Program Candidate Body of Knowledge (CBOK) into professional practice for the 2017 exam. This book helps you bring together the skills and concepts from Levels I and II to formulate a detailed, professional response to a variety of real-world scenarios. Coverage spans all CFA Program topics and provides a rigorous treatment of portfolio management, all organized into individual study sessions with clearly defined Learning Outcome Statements. Visual aids clarify complex concepts, and practice questions allow you to test your understanding while reinforcing major content areas.

Levels I and II equipped you with foundational investment tools and complex analysis skill; now, you'll learn how to effectively synthesize that knowledge to facilitate effective portfolio management and wealth planning. This study set helps you convert your understanding into a professional body of knowledge that will benefit your clients' financial futures.

Master essential portfolio management and compliance topics Synthesize your understanding into professional guidance Reinforce your grasp of complex analysis and valuation Apply ethical and professional standards in the context of real-world cases

CFA Institute promotes the highest standards of ethics, education, and professional excellence among investment professionals. The CFA Program Curriculum guides you through the breadth of knowledge required to uphold these standards. The three levels of the program build on each other. Level I provides foundational knowledge and teaches the use of investment tools; Level II focuses on application of concepts and analysis, particularly in the valuation of assets; and Level III builds toward synthesis across topics with an emphasis on portfolio management.

How to Use the CFA Program Curriculum v

Curriculum Development Process v

Organization of the Curriculum vi

Features of the Curriculum vi

Designing Your Personal Study Program vii

Feedback ix

Ethical and Professional Standards

Study Session 1 Code of Ethics and Standards of Professional Conduct 3

Reading 1 Code of Ethics and Standards of Professional Conduct 5

Preface 5

Evolution of the CFA Institute Code of Ethics and Standards of Professional Conduct 6

Standards of Practice Handbook 6

Summary of Changes in the Eleventh Edition 7

CFA Institute Professional Conduct Program 9

Adoption of the Code and Standards 10

Acknowledgments 10

Ethics and the Investment Industry 11

Why Ethics Matters 11

CFA Institute Code of Ethics and Standards of Professional Conduct 15

Preamble 15

The Code of Ethics 15

Standards of Professional Conduct 16

Reading 2 Guidance for Standards I–VII 21

Standard I: Professionalism 21

Standard I(A) Knowledge of the Law 21

Guidance 21

Recommended Procedures for Compliance 26

Application of the Standard 27

Standard I(B) Independence and Objectivity 30

Guidance 30

Recommended Procedures for Compliance 35

Application of the Standard 36

Standard I(C) Misrepresentation 43

Guidance 43

Recommended Procedures for Compliance 46

Application of the Standard 48

Standard I(D) Misconduct 53

Guidance 53

Recommended Procedures for Compliance 54

Application of the Standard 54

Standard II: Integrity of Capital Markets 56

Standard II(A) Material Nonpublic Information 56

Guidance 56

Recommended Procedures for Compliance 60

Application of the Standard 63

Standard II(B) Market Manipulation 68

Guidance 68

Application of the Standard 69

Standard III: Duties to Clients 73

Standard III(A) Loyalty, Prudence, and Care 73

Guidance 73

Recommended Procedures for Compliance 77

Application of the Standard 78

Standard III(B) Fair Dealing 82

Guidance 82

Recommended Procedures for Compliance 84

Application of the Standard 86

Standard III(C) Suitability 90

Guidance 90

Recommended Procedures for Compliance 93

Application of the Standard 94

Standard III(D) Performance Presentation 97

Guidance 97

Recommended Procedures for Compliance 98

Application of the Standard 98

Standard III(E) Preservation of Confidentiality 101

Guidance 101

Recommended Procedures for Compliance 103

Application of the Standard 103

Standard IV: Duties to Employers 105

Standard IV(A) Loyalty 105

Guidance 105

Recommended Procedures for Compliance 109

Application of the Standard 109

Standard IV(B) Additional Compensation Arrangements 116

Guidance 116

Recommended Procedures for Compliance 116

Application of the Standard 116

Standard IV(C) Responsibilities of Supervisors 118

Guidance 118

Recommended Procedures for Compliance 120

Application of the Standard 122

Standard V: Investment Analysis, Recommendations, and Actions 126

Standard V(A) Diligence and Reasonable Basis 126

Guidance 126

Recommended Procedures for Compliance 130

Application of the Standard 130

Standard V(B) Communication with Clients and Prospective Clients 137

Guidance 138

Recommended Procedures for Compliance 140

Application of the Standard 141

Standard V(C) Record Retention 146

Guidance 146

Recommended Procedures for Compliance 147

Application of the Standard 148

Standard VI: Conflicts of Interest 149

Standard VI(A) Disclosure of Conflicts 149

Guidance 149

Recommended Procedures for Compliance 152

Application of the Standard 152

Standard VI(B) Priority of Transactions 157

Guidance 157

Recommended Procedures for Compliance 158

Application of the Standard 160

Standard VI(C) Referral Fees 162

Guidance 162

Recommended Procedures for Compliance 162

Application of the Standard 162

Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate 165

Standard VII(A) Conduct as Participants in CFA Institute Programs 165

Guidance 165

Application of the Standard 167

Standard VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program 170

Guidance 170

Recommended Procedures for Compliance 174

Application of the Standard 174

Practice Problems 177

Solutions 187

Study Session 2 Ethical and Professional Standards in Practice 195

Reading 3 Application of the Code and Standards 197

Introduction 197

The Consultant 198

Mark Vernley 198

The Consulting Contract 199

Evaluation of the Situation 199

Pearl Investment Management (A) 202

Knowledge of the Law and Obligation to Obey 203

Responsibilities of Supervisors 204

Trading for Personal Accounts 204

Maintaining Confidential Client Information 205

Pearl Investment Management (B) 206

Responsibility of Candidates to Comply with the Code and Standards 206

Dealing with Clients 207

Errors in Client Accounts 208

Pearl Investment Management (C) 208

Proper Care and Independent Judgment 210

Use of Insider Information 210

Using the Research of Others 211

Reasonable Basis for a Research Opinion 211

Relevant Factors and Fact versus Opinion in Research Reports 212

Misrepresentation of Services and Performance Presentation 212

Practice Problems 214

Solutions 231

Reading 4 Asset Manager Code of Professional Conduct 239

Introduction 239

Adopting the Code and Claiming Compliance 241

Acknowledgement of Claim of Compliance to CFA Institute 241

General Principles of Conduct 241

Asset Manager Code of Professional Conduct 242

Loyalty to Clients 242

Investment Process and Actions 242

Trading 242

Risk Management, Compliance, and Support 243

Performance and Valuation 243

Disclosures 243

Appendix 6—Recommendations and Guidance 244

Loyalty to Clients 244

Investment Process and Actions 245

Trading 248

Risk Management, Compliance, and Support 250

Performance and Valuation 254

Disclosures 255

Practice Problems 259

Solutions 264

Glossary G-1

Index I-1