1. The Code of Ethics and Standards of Professional Conduct of The South African Institute of Financial Markets
- A member shall conduct himself or herself with integrity and dignity, and act in an ethical manner in his or her dealings with the public, clients, employers, employees, dealers and fellow-members.
- A member shall act with proper skill, care and diligence, and exercise independent professional judgement in the conduct of all professional dealings.
- A member shall provide full and accurate information to clients at all times.
- A member shall act with competence, and shall strive to maintain and improve his or her competence and that of others in the profession.
- A member shall maintain knowledge of and comply with all applicable laws, rules and regulations of a government, governmental agency and regulatory organisation governing his or her professional, financial or business activities.
- A member shall not knowingly participate in, assist, or withhold knowledge of any acts in violation of any applicable law, rule or ethical code governing his or her profession, financial or business activities.
2. Integrity
2.1 Independence
Professional independence is the ability to act, and to be seen to act, with integrity and objectivity. Independence is fundamental to the relationship of trust between the member, the client and the public. A member shall continually exercise good judgement to achieve and maintain such independence and objectivity. A member may not claim that he or she is independent or impartial if he or she is not, and must take reasonable care to ensure that any claim of independence or impartiality adequately includes any limitation that there may be on either.
It is essential that conclusions, opinions and recommendations be made dispassionately, without regard to personal bias or personal economic considerations.
2.2 Inducements
A member may not solicit or accept any gift or inducement (whether by way of direct or indirect benefit) of a kind which is designed to influence his or her actions, or which may cause detriment to a client. This standard does not apply if the inducement is remuneration, which is paid in money, in respect of a deal done pursuant to an agreement, and which is disclosed to the client as required by the relevant regulations. A member may not offer or give to another any gift or inducement of a kind which is designed to influence the actions of the beneficiary, for personal gain, or which may directly or indirectly detrimental to a client.
2.3 Overcharging
A member’s charges must be fair in their incidence and reasonable in their amount, having regard to all revealed circumstances. A member may charge his or her clients no more than his or her rightful commission plus any bona fide transaction costs and service charges.
2.4 Churning
A member may not-
- buy or sell contracts (both inter- and intra-portfolio) without the exercise of discretion for any client; or
- advise a private investor to buy or sell contracts, with the primary intention of maximising commission, or where the performance of the client’s portfolio is of secondary consideration.
2.5 Insider Trading
A member may not, with intent or through negligence, profit or seek to profit from inside information, nor assist anyone with such unpublished price-sensitive information to make a profit for the member or his or her client.
Should a member acquire such information as a result of a relationship with a client, he or she shall not communicate the information (other than within the relationship), or take investment action on the basis of such information.
Should a member acquire such information outside of a client relationship, where the member knows, or should have known, that such information was disclosed to him or her in a breach of duty or ethical conduct, the member shall not communicate or act upon the inside information.
If a breach of duty or ethical conduct exists, the member must make reasonable efforts to achieve public dissemination of such information.
2.6 Front-Running
A member must conduct himself or herself in such a manner that transactions for his or her customers, clients and employer have priority over personal transactions, and so that his or her personal transactions do not operate adversely to their interests. As such, a member may not place personal orders in advance of client or institutional orders, with the foreknowledge that a movement in price may occur from a large trade.
2.7 Preservation of Confidentiality
A member must preserve the confidentiality of information communicated by the client concerning matters within the scope of the confidential relationship, except to disclose information regarding illegal activities.
2.8 Misrepresentation of Services
A member shall not make any statements, orally or in writing, which misrepresent-
- the services that the member is capable of performing for the clients;
- the qualifications of the member
- the investment performance that the member has accomplished or can reasonably be expected to achieve for his or her clients; and
- the expected performance of any investment
2.9 Conflict of Interest
A member must be vigilant in identifying actual or potential conflicts of interest, and may not allow himself or herself to be placed in a position in which his or her obligations to one client are, or are likely to be perceived as being in conflict with his or her obligations to another client, or to his or her own personal or professional interests. Conflicts of interest also have legal implications.
2.10 Professional Misconduct
A member may not-
- commit a criminal act that upon conviction materially reflects adversely on his or her honesty, trustworthiness, or fitness as a member in other respects; or
- engage in conduct involving dishonesty, fraud or misrepresentation
3. Skill, Care And Diligence
3.1 Standard of Care
A member must in all professional dealings exercise care of the standard of a bona fide person dealing with his or her own affairs.
3.2 Prompt And Timely Execution
A member must act promptly in accordance with instructions, unless he or she has discretion as to timing and uses that discretion in a responsible way. Due to the nature of financial markets, the success of any implementation of a client directive is directly dependent on timing. A member should possess the appropriate level of skill to enable him or her to carry out timely execution (in accordance with the ethical principle of competence).
3.3 Suitability
A member must seek from his or her clients, whenever it is appropriate to do so, any information about their circumstances and investment objectives which the member might reasonably expect to be relevant in enabling the member to fulfil his or her duties to them.
In considering these matters, the member must take into account-
- the needs and circumstances of the client;
- the basic characteristics of the investment involved;
- the basic characteristics of the total portfolio; and
- the potential risks of loss involved
A member must use reasonable judgement to determine the applicable relevant factors.
A member must distinguish between fact and opinion in the presentation of recommendations. The member must ensure that his or her clients are properly informed about contracts envisaged, their implications, including potential risks and returns, and other relevant facts.r sell contracts (both inter- and intra-portfolio) without the exercise of discretion for any client; or
- advise a private investor to buy or sell contracts, with the primary intention of maximising commission, or where the performance of the client’s portfolio is of secondary consideration.
3.4 Twisting
“Twisting” is the practice of shifting profits and losses between portfolios with the aim of reporting unrealistic (usually optimistic) profits or portfolio performance to a client or clients. Members may not intentionally practise twisting as it amounts to a misrepresentation of fact.
3.5 Best Execution
A member must take reasonable steps both to find and to deal on the terms which are the best available for the client.
3.6 Standards Of Advice
The member must exercise diligence and thoroughness in offering investment advice to others and in taking investment action for others. He or she must have a reasonable and adequate basis for such advice and actions, supported by appropriate research and investigation. He or she must make reasonable and diligent efforts to avoid material misrepresentation in the presentation of any recommendations.
3.7 Financial Resources
A member must ensure that he or she maintains adequate financial resources to meet his or her business commitments and to withstand the risks to which his or her profession is subject.
4. Full, Accurate Information
4.1 Access to Funds And Availability of Fund Manager
A member must inform his or her clients in advance of any restrictions or limitations pertaining to the access of the client to the client’s funds. Similarly, the member must ensure that the client understands the implications of making illiquid investments. In the absence of such restrictions or limitations, the member must ensure that a client who requests access to his or her funds obtains such access within a reasonable period of time. A member must ensure that his or her clients are able to contact the member timeously and with ease.
4.2 Time to Consider
A member must afford potential investors sufficient time to reach an informed and well-considered decision. As such, a member may not use high-pressure sales tactics that are deemed unethical.
4.3 Statements and Forecasts
A member must provide objective and truthful information relevant to any investment decision. This includes information that adequately conveys all material facts and the major factors likely to affect its performance. The member must distinguish between fact and opinion in the presentation of recommendations.
4.4 Risk Disclosure
A member must accurately inform the client of all risks involved in any investment decision. When engaged in futures trading, pursuant to the rules of SAFEX, clients must sign a standardised risk disclosure document prior to entering into any futures contract. This document is as an acknowledgement that the client is aware of the risks inherent in the trading medium, and of the nature and extent of his or her rights and obligations.
4.5 Explanation of Rights, Obligations and Costs
A member must inform his or her clients of all rights, obligations and costs involved. The member must supply the client with a disclosure document containing details of the various expenses that may be charged to his or her account, and the circumstances under which these charges would be incurred.
4.6 Complete and Truthful Accounting
A member must, as a matter of course, supply information to the client with respect to-
- where the client’s funds will be held;
- the type and frequency of regular accounting statements provided;
- details of any charges or fees incurred against the client’s account;
- the financial performance of the SAFEX member with whom the client is dealing, when engaged in futures trading
- the name of the firm of auditors or chartered accountants responsible for auditing the accounts of the
- SAFEX member, when engaged in futures trading; and
- how the client may obtain interim information about his or her account
Furthermore, the member must, on request, provide additional information to the client regarding-
- the current status and value of the client’s account; and
- when and how profits or losses were realised or incurred.
5. Promotional Material
5.1 Acceptable Promotional Material
Promotional material, in the form of oral, visual or documentary presentation directed at the public through any medium of communication, is acceptable if the purpose of such advertising is to call a potential client’s attention to an investment and to encourage the potential client to obtain additional information about the investment.
5.2 General Prohibition
A member may not make any communication with the public which-
- is fraudulent or deceitful;
- employs or is part of a high pressure approach; or
- when engaged in futures trading, makes any statement that futures trading is appropriate for all persons.
5.3 Content of Promotional Material
No member may use promotional material which –
- is likely to deceive the public;
- contains any material misstatement of fact, or omits a fact if the omission renders the promotional material misleading;
- mentions the possibility of profit unless accompanied by an equally prominent statement of the risk of loss;
- includes any reference to either hypothetical results or to the actual past trading profits without mentioning that these hypothetical or past results are not necessarily indicative of the future results; or
- includes any specific numerical or statistical information about the past performance of any actual accounts (including rate of return) unless such information is, and can be demonstrated to be, representative of actual performance for the same time period of all reasonably comparable accounts.
5.4 Statements of Opinions
Statements of opinion included in the promotional material must be clearly identified as such, and must have a reasonable basis of fact.
5.5 Unsolicited Calls
“Unsolicited calls” refer to personal visits or oral communications made without express invitation.