Chandler Bond Market Review

The Chartered Financial Analyst Designation and the Duties of an Investment Adviser

As an investment adviser registered with the Securities and Exchange Commission (SEC) through our Form ADV filings, we have taken on certain important duties that are not required of those who are not registered.  Falling under the heading of “fiduciary duty,” every registered investment adviser (RIA) must act in the best interests of their clients individually and must place the client’s interests ahead of their own.

A comprehensive “laundry list” of fiduciary duties isn’t available within the governing law, which is the Investment Advisers Act of 1940.  However, the Chartered Financial Analyst (CFA) Institute has created and approved The Code of Ethics and Standards of Professional Conduct that CFA® charterholders are required to uphold. The members of our firm who hold CFA charters are bound by The Code of Ethics and Standards of Professional Conduct, and everyone at Chandler believes in and upholds the principles of the Code.

The tenets of the Institute’s Code of Ethics include the following:

  • Act with integrity, competence, diligence, respect and in an ethical manner with the public, clients and prospective clients.
  • Place the integrity of the investment profession and the interest of clients above personal interests.
  • Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions and engaging in other professional activities.
  • Practice and encourage others to practice in a professional and ethical manner.
  • Promote the integrity of and uphold the rules governing capital markets.
  •  Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

The Institute’s Standards of Professional Conduct elaborate on the principles of the Code of Ethics.  The following are some of the requirements of the Standards with regard to section III: Duties to Clients:

A. Loyalty, Prudence and Care.  Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. Members and Candidates must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests.

B. Fair Dealing. Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities.

C. Suitability.

1. When Members and Candidates are in an advisory relationship  with a client, they must:

a. Make a reasonable inquiry into a client’s or prospective client’s investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation or taking investment action and must reassess and update this information regularly.

b. Determine that an investment is suitable to the client’s financial situation and consistent with the client’s written objectives, mandates, and constraints before making an investment recommendation or taking investment action.

c. Judge the suitability of investments in the context of the client’s total portfolio.

2. When Members and Candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must make only investment recommendations or take only investment actions that are consistent with the stated objectives and constraints of the portfolio.

D. Performance Presentation. When communicating investment performance information, Members and Candidates must make reasonable efforts to ensure that it is fair, accurate, and complete.

E. Preservation of Confidentiality. Members and Candidates must keep information about current, former, and prospective clients confidential unless:

1. The information concerns illegal activities on the part of the client or prospective client,

2. Disclosure is required by law, or

3. The client or prospective client permits disclosure of the information.

Clients Benefit from the Institute’s Code of Ethics and Standards of Professional Conduct

In order to obtain the CFA designation, a candidate must gain command of a large body of knowledge focused on investment analysis, portfolio management, practical knowledge and ethics.  The designation shows that its holder has completed a graduate degree level of study and has passed three sequential 6-hour examinations.

Due to its depth and comprehensiveness, the CFA program is recognized worldwide as a comprehensive foundation for investment analysis and portfolio management.  Most industry professionals and many members of the public recognize the value of the designation.  Equally important to the CFA Institute and to the public is the program’s primary focus on ethics and professional conduct.

When a client retains an investment adviser who holds a CFA charter, the client can reasonably expect that the adviser will approach the portfolio in a methodical way that includes:

  • First, a Charterholder has the depth and breadth of knowledge to understand fully the client’s investment objectives, risk constraints and investment policy.
  • Next, a Charterholder has specific training in structuring an investment plan designed to fulfill the client’s objectives.
  • And a methodology for evaluating, researching and selecting securities for inclusion in the portfolio is an integral part of their training.

Key to the process is that CFA charterholders are bound to execute the investment program in an ethical way that places the client’s interests above their own while aligning with the client’s needs.  They will seek best execution on securities that are suitable for the individual client, and must treat all clients fairly in all of their dealings.

We believe the CFA program combines the critical elements of knowledge and ethics to improve the quality of investment decision-making and the integrity of the investment industry.  This is why we support our employees’ participation in the program, and require that portfolio managers hold the CFA designation at the time they take on portfolio management responsibilities.

– Kay Chandler, CFA




This report is provided for general information purposes only and should not be construed as specific legal, tax, or financial planning advice. All opinions and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice. This report is not intended to constitute an offer, solicitation, recommendation or advice regarding any securities or investment strategy. This information should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest, credit, and market risk. Interest rate risk: the value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market in general could decline due to economic conditions,especially during periods of rising interest rates.

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