2. Definition
Members and Candidates must make
reasonable efforts to ensure that
anyone subject to their supervision or
authority complies with applicable laws,
rules, regulations, and the Code and
Standards.
3. —Immanuel Kant
“In law a man is guilty
when he violates the rights
of others. In ethics he is
guilty if he only thinks of
doing SO.”
4. Guidance
Must promote actions
by all employees to
comply with applicable
laws and firm policies
Members and candidates
acting as supervisors must
also have in-depth knowledge
of the Code and Standards
Standard IV(C) requires that
members make reasonable
efforts to prevent and
detect violations
Members and candidates
should implement education
and training programs on a
recurring basis for employees
under their supervision
01
04 05
02
Supervision in a particular case
depends on the number of
employees supervised and the
work performed by those
employees
Establishing incentives to
reward ethical behavior offers
another way to assist
employees in complying with
their legal & ethical obligations
03
06
5. System for
Supervision
Members and candidates with supervisory responsibility must
understand what constitutes an adequate compliance system for
their firms
Once compliance procedures are established, efforts must be
made to ensure that the procedures are monitored and enforced
Compliance programs must be appropriate for the size and nature
of the organization
Once a supervisor learns that an employee has or may have
violated the law or the Code and Standards, the supervisor must
initiate an assessment to determine the extent of the wrongdoing
6. Supervision
IncludesDetection
Members and candidates with supervisory responsibility must
also make reasonable efforts to detect violations of laws, rules,
regulations, firm policies, and the Code and Standards
The fact that violations do occur may indicate, however, that the
compliance procedures are inadequate
A member or candidate may be in violation of Standard IV(C) if
he or she knows or should know that the procedures designed to
promote compliance, including detecting and preventing
violations, are not being followed
7. RecommendedProcedures
forCompliance
Codes of Ethics or Compliance Procedures :
Members and candidates are encouraged to recommend that their employers
adopt a code of ethics. Adoption of a code of ethics is critical to establishing a
strong ethical foundation for investment advisory firms and their employees.
Codes of ethics formally emphasize and reinforce the client loyalty
responsibilities of investment firm personnel, protect investing clients by
deterring misconduct, and protect the firm’s reputation for integrity.
To ensure the creation of a culture of ethics and integrity rather than one that
merely focuses on following the rules, the principles in the code of ethics must
be stated in a way that is accessible and understandable to everyone in the
firm.
8. Implementation of Compliance Education and Training :
Regular ethics and compliance training, in conjunction with adoption of a code
of ethics, is critical to investment firms seeking to establish a strong culture of
integrity and to provide an environment in which employees routinely engage in
ethical conduct in compliance with the law. Training and education assist
individuals in both recognizing areas that are prone to ethical and legal pitfalls
and identifying those circumstances and influences that can impair ethical
judgment.
Establish an Appropriate Incentive Structure.
RecommendedProcedures
forCompliance
