Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations.
In most countries, providing investment advice or investment management is subject to laws and regulations. Members and candidates are required to comply with all applicable laws.
When local laws conflict with the Code and Standards, or when a member does business in multiple countries, members must follow the strictest of the applicable laws. Behavior that would otherwise be legal but is inconsistent with the Standards is unacceptable. Even the strictest laws should be viewed as the minimum threshold for acceptable action.
Members and candidates must not knowingly participate in illegal or unethical activities. If there is reasonable belief that client or employer activities are illegal or unethical, the member must dissociate from such activity. The appropriate steps to follow in such situations are (if the issue is not addressed by a prior step):
- Notify a supervisor or the firm’s compliance department
- Dissociate from the activity by requesting a different assignment or client, or by removing your name from written reports
- Leave the employer
Members and candidates are encouraged to report suspected violations to CFA Institute. If local laws require, the violations must also be reported to local regulators.
Members and candidates can comply with Standard I(A): Knowledge of the Law by such actions as:
- Staying informed of changes in local regulations, such as by encouraging periodic training by the firm’s legal staff
- Reviewing written compliance procedures regularly
- Maintaining current files and records
Members should seek advice from legal counsel when questions arise. When dissociating from unethical behavior members should document the suspected violation and attempt to persuade the perpetrator to change the behavior.
Members and candidates should also encourage their employers to develop and/or adopt a Code of Ethics; to provide information on applicable laws; and to establish procedures for reporting violations.
The CFA Institute Standards of Practice Handbook provides a number of examples of situations in which Knowledge of the Law may or may not apply. For example:
A member learns of a potential violation seeks legal counsel, and is told that it would be difficult to prove he was involved. Nonetheless, the member should report the violation to a supervisor, seek independent legal advice, and determine whether the violation should be reported to regulators.
A member is asked to provide prospective clients with performance information that is misleading. She should refuse to use the misleading information and encourage the employer to report accurate performance data. If the firm does not do so, she should notify the firm why she will not use the misleading information, and if the firm insists she use it she must seek other employment.
A member obtains material nonpublic information but lives in a country that does not prohibit its use. The member must comply with the Standards and not use the information.