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ii Contents

Practice Problems   50
Solutions   52

Reading 3 Guidance for Standards I–VII   55

Standard I: Professionalism   55
Standard I(A) Knowledge of the Law   55
Guidance   55
Recommended Procedures for Compliance   60
Application of the Standard   61
Standard I(B) Independence and Objectivity   64
Guidance   64
Recommended Procedures for Compliance   69
Application of the Standard   70
Standard I(C) Misrepresentation   77
Guidance   77
Recommended Procedures for Compliance   80
Application of the Standard   82
Standard I(D) Misconduct   87
Guidance   87
Recommended Procedures for Compliance   88
Application of the Standard   88
Standard II: Integrity of Capital Markets   90
Standard II(A) Material Nonpublic Information   90
Guidance   90
Recommended Procedures for Compliance   94
Application of the Standard   97
Standard II(B) Market Manipulation   102
Guidance   102
Application of the Standard   103
Standard III: Duties to Clients   107
Standard III(A) Loyalty, Prudence, and Care   107
Guidance   107
Recommended Procedures for Compliance   111
Application of the Standard   112
Standard III(B) Fair Dealing   116
Guidance   116
Recommended Procedures for Compliance   118
Application of the Standard   120
Standard III(C) Suitability   124
Guidance   124
Recommended Procedures for Compliance   127
Application of the Standard   128
Standard III(D) Performance Presentation   131
Guidance   131
Recommended Procedures for Compliance   132
Application of the Standard   132
Standard III(E) Preservation of Confidentiality   135
Guidance   135
Recommended Procedures for Compliance   137

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