CFA Level III · Level III Core

Asset Manager Code of Professional Conduct: formula sheet

Full chapter guide

Key formulas

Who the Code applies to: Asset Manager Code → firms that manage assets for clients; It is a firm-level code. The Code of Ethics and Standards apply to individual members and candidates.
Nature of adoption: Adoption = voluntary; claim of compliance = all applicable provisions met; A firm cannot claim partial compliance. It must meet every provision that applies to it.
Relationship to law: Follow the stricter of applicable law and the Code; The Code does not override law. If law is stricter, the firm follows the law.
Purpose: Protect client interests + support market integrity + build trust; Use these three ideas to justify why a firm would adopt the Code.
Quality test for any disclosure: Truthful + Accurate + Complete + Understandable; Fail any one and the disclosure is deficient, even if some information was given.
Fees and compensation: Disclose how the manager and the firm are paid; Includes fee structure and any performance-based pay. Hidden or unclear charges are a red flag.
Conflicts of interest: Identify, then disclose (or avoid) any conflict that could affect advice or dealing; Disclosure supports informed consent. It does not replace putting the client first.
Investment process and risk: Describe strategy, process and material risks, and any material change; Clients need this to judge suitability and to see if the manager drifts from the mandate.
Performance and valuation: Present performance fairly, with the facts needed to interpret it, and explain valuation methods; Do not cherry-pick periods or omit material facts. GIPS applies where the firm claims compliance with it.
Communication timing: Regular and timely, not only when results are good; Bad news and material breaches are disclosed as promptly as good news.
Claim rule: Claim of compliance allowed only if the firm complies with all Code provisions that apply to it; No partial or cherry-picked claims. If the firm cannot meet the Code, it should not claim compliance.
Accuracy rule: Statement made = actual status of the firm; A claim that overstates, misleads or implies more than the firm does is a breach of the spirit of the Code.
Ongoing rule: Stop complying → stop claiming (or remedy promptly); The claim must stay true for as long as it is made.
Code vs GIPS: Asset Manager Code = conduct toward clients; GIPS = performance calculation and presentation; Separate claims. Neither replaces the other, and each has its own requirements.

Quick revision

The AMC applies to firms that manage client assets, not to individual members as such.
A firm that adopts the Code commits to follow its principles and procedures.
Know each general principle by name and what it requires in practice.
Client interests come first in the firm's conduct.
The Code expects the firm to have compliance procedures, not just good intentions.
Disclosures must be clear and accurate so clients can make informed decisions.
Know what the recommendations and guidance add beyond the principles.
Know how and to whom a firm notifies that it complies with the Code.
The AMC is distinct from the CFA Institute Code and Standards and from GIPS.
In essays, answer the command word first, then give the reason in a short sentence.
Use the official wording of the Code when naming a principle or a breach.

Common mistakes

Saying the Asset Manager Code applies to individual CFA charterholders. Fix: Remember: AMC is for firms; Code and Standards are for members and candidates. A person can follow both through the firm they work for.
Saying all asset managers must comply with the Code. Fix: Adoption is voluntary. A firm is bound only if it chooses to adopt and claim compliance, or if it takes on the duty by contract.
Treating recommended procedures as extra mandatory rules on top of the Code. Fix: Separate the Code's provisions from the supporting guidance. Check the exact wording in the curriculum before saying something is required.
Answering with a generic compliance fix that ignores the vignette. Fix: Quote the firm's actual practice, name the principle it touches, then pick the control that targets that gap.
Treating disclosure as a substitute for acting in the client's interest Fix: Disclosure informs the client. The manager must still put client interests first and manage or avoid the conflict.
Disclosing only favourable performance Fix: Performance must be fair and include material facts. Omitting weak periods or risks is misleading.
Thinking a firm can claim compliance with only the parts of the Code it follows. Fix: Remember the claim covers the Code as a whole. If the firm cannot meet the applicable provisions, it should not claim compliance.
Treating the claim as a one-time act. Fix: Link the claim to current status. A firm that stops complying must stop claiming or fix the gap promptly.

Exam tips

Look at the subject of the sentence. Firm means the Asset Manager Code. Member or candidate means the Standards.
When a question asks you to justify adoption, give the purpose in few words: protect clients, support market integrity, build trust.
Reject answer choices that call the Code mandatory or that allow partial compliance claims.
In essay sets, answer exactly the command word. For identify, name the point and stop. For explain, add one reason.
Link scope questions to the client scenario. The Code exists for client benefit.
Read the command word in bold and answer only that, with the exact number of responses asked for.
Always link a recommended procedure to a specific principle and to the client's interests.
Prefer options that create documented, monitored and owned processes over informal or one-time fixes.