Asset Manager Code of Professional Conduct

Clients hire firms, not only individuals, and many failures in asset management start with firm-level incentives, controls and disclosures. CFA Institute's Asset Manager Code sets voluntary, firm-wide standards for any organisation that manages client assets. This module explains why the Code exists and how a firm claims compliance, sets out its six General Principles of Conduct and the six groups of required provisions that put them into practice, and shows how to test a firm's practices against the Code and close the gaps.

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What you will learn

1. Explain the purpose and scope of the Asset Manager Code, how a firm claims compliance and the benefits of adopting it.

The Code and Standards bind individuals; the Asset Manager Code sets standards for firms that manage client assets.
The Code is voluntary, principles-based and global: General Principles, required provisions and non-mandatory guidance.
Compliance is all or nothing; partial claims are not permitted.
The firm notifies CFA Institute, which does not verify claims, and its compliance statement must say the claim is unverified.
Members and candidates at an adopting firm remain personally bound by the Code and Standards.

2. Describe the six General Principles of Conduct and the firm-level provisions on loyalty, investment process, trading, risk management and compliance, performance and valuation, and disclosures.

Six principles: ethical conduct, clients' benefit, independence and objectivity, skill and diligence, timely and accurate communication, respect for market rules.
Six provision areas: loyalty, investment process, trading, risk management and compliance, performance and valuation, disclosures.
Required, not optional: a compliance officer, a business-continuity plan, a firmwide risk process and independent confirmation of client information.
Client commissions may pay only for products and services that directly assist investment decisions, never for running the firm.
Use fair-market prices, and good-faith fair-value methods where none exist; disclose valuation methods.
Disclose conflicts, regulatory actions, fees and costs, soft commissions and significant personnel changes.

3. Determine whether a firm's practices are consistent with the Asset Manager Code and recommend procedures that close any gaps before the firm claims compliance.

Test each practice against a specific provision, then recommend the simplest procedure that closes the gap.
Hard-to-price assets should be valued under a written policy overseen by people independent of those paid on performance, with methods disclosed.
A compliance officer is required; the guidance recommends independence from investment and operations staff.
Statements sent directly by a custodian, or an auditor's review, provide independent confirmation of client information.
Close every gap before claiming compliance, then review, train and test continually.

Module at a glance

The Code and Standards govern individuals; the Asset Manager Code governs the firms that manage client assets.
Compliance is all or nothing: meet every required provision, notify CFA Institute and state that the claim is unverified by CFA Institute.
Six General Principles: ethical conduct, clients first, independence and objectivity, skill and diligence, timely and accurate communication, respect for market rules.
Six provision areas: loyalty, investment process, trading, risk management and compliance, performance and valuation, disclosures.
Required items include a compliance officer, a business-continuity plan, a firmwide risk process and independent confirmation of client information.
Client commissions pay only for investment decision support; fair-market or good-faith fair values; disclose fees, conflicts, regulatory actions and key personnel changes.
Close gaps with targeted procedures first, then claim compliance and keep testing the controls.

This free module has 3 lessons, 14 practice questions with full explanations.

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