Asset Manager Code L3

Section: Asset Manager Code of Professional Conduct Estimated study time: 45 minutes Content: The Asset Manager Code (AMC) of Professional Conduct is a framework developed by CFA Institute specifically for investment management firms — it complements the Code and Standards (which apply to individual members) by establishing firm-level ethical obligations. Whereas the Code and Standards govern individual behavior, the AMC sets expectations for how asset management organizations should be structured, governed, and operated. A firm claiming compliance with the AMC must comply with all six components. The six components of the AMC are: (1) Loyalty to Clients, (2) Investment Process and Actions, (3) Trading, (4) Risk Management, Compliance, and Support, (5) Performance and Valuation, and (6) Disclosures. Each component has required practices. For example, under Loyalty to Clients, the firm must act in clients' best interests, maintain independence and objectivity, avoid conflicts of interest, and establish a written code of ethics enforced through training and discipline. The Trading component requires that all firms establish policies for trade allocation and execution. Trades must be allocated across clients fairly — no "cherry picking" favorable fills for preferred accounts. Soft-dollar arrangements must be disclosed and must benefit clients. The firm must prohibit personal trading that conflicts with client interests and require pre-clearance of personal trades in securities the firm is actively recommending. Risk Management and Compliance requires that firms appoint a chief compliance officer who is not also the head of investments (separation of duties). Firms must conduct periodic internal audits, maintain records for regulatory purposes, and develop business continuity plans. The compliance function must have sufficient independence and authority to enforce policies. Performance and Valuation under the AMC aligns closely with…