Use Standard I (Professionalism) to judge a case
The idea
Standard I, Professionalism, has five parts. Knowledge of the Law requires understanding and complying with applicable laws and regulations, applying the stricter of law or Code and Standards where they differ. Independence and Objectivity requires reasonable care to maintain independence and objectivity against pressure, and prohibits offering, soliciting or accepting any gift or benefit that reasonably could be expected to compromise judgement. Misrepresentation prohibits untrue statements about investments, qualifications or performance. Misconduct prohibits professional conduct involving dishonesty, fraud or deceit, and any act, including outside professional life, that reflects adversely on professional reputation, integrity or competence. Competence, added in the 12th edition, requires members to act with and maintain the knowledge and skills their role demands, which change as the role does, without prescribing any particular continuing education programme.
A practice question
Standard I of the Standards of Professional Conduct covers:
- Professionalism, Standard I — correct
- Duties to Clients, Standard IIIWhy not: That is Standard III, covering loyalty, fair dealing, suitability, performance presentation and confidentiality.
- Investment Analysis, Standard VWhy not: That is Standard V, covering diligence, communication with clients and record retention.
Standard I is Professionalism, comprising I(A) Knowledge of the Law, I(B) Independence and Objectivity, I(C) Misrepresentation, I(D) Misconduct and, since the 12th edition, I(E) Competence.
A harder one
An analyst accepts an expensive holiday from a company they cover. This most likely raises an issue under:
- Misrepresentation, I(C)Why not: Standard I(C) concerns misleading statements, and nothing here turns on what the analyst has said.
- Independence and Objectivity, I(B) — correct
- Knowledge of the Law, I(A)Why not: Accepting hospitality is not generally unlawful, and I(A) is about compliance rather than objectivity.
Standard I(B) Independence and Objectivity is engaged, since a benefit from a party with an interest in the analyst's conclusion could reasonably be expected to compromise judgement.
The hardest tier
A member works in a jurisdiction whose law is stricter than the Code and Standards. They must:
- follow the Code and Standards, which take precedenceWhy not: The Code does not take precedence over stricter law; it is a floor rather than a ceiling.
- choose whichever is more practicalWhy not: Convenience does not enter the test, which is settled by which requirement is stricter.
- follow the local law, which is stricter — correct
Standard I(A) points to the stricter requirement in either direction. Where the law demands more than the Code, the law governs.
In the app: 18 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.
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