CFA Institute Professional Conduct, Industry & Exam Investigation Defense Attorneys: CFA Code of Ethics & Standards of Professional Conduct - "Code and Standards" PCP Violation Matters
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LYTEL & LYTEL, LLP represent CFA Charterholders, CFA Institute Candidates & CFA Institute Members (all are "Covered Persons") during the CFA Institute Professional Conduct Program ("PCP") investigation & disciplinarian process, including advising clients during the PCP inquiry response phase to Statement of Charges and on to the full legal defense against allegations & determined violations. Further, our defense attorneys counsel Covered Persons on the disciplinarian proceedings and sanctions.
Diana P. Lytel is uniquely qualified as a defense attorney to oversee the CFA Institute Professional Conduct legal group given her work within the National Association of Securities Dealers (now FINRA), her experience in the Investigation Division at the Department of Corporations (Department of Business Oversight) and her tenure with Morgan Stanley's litigation department. Her specialized legal background with allegations of complex violations has been a great asset to our clients as she frequently counsels Covered Persons through the CFA Institute Professional Conduct Program (PCP) investigations.
Ms. Lytel is recognized for her legal excellence by Super Lawyers® and with an AV Rating by Martindale-Hubbell®, the highest Preeminent "5.0/5.0" attorney rating in her profession. In 2017, she graced the cover of Verdict Magazine titled "Young Guns: Stars of the Wild West" where Ms. Lytel was featured on multiple pages. She consistently demonstrates leadership in her legal profession by holding both Executive & Board of Director positions with prominent law organizations, while also being appointed to Chair several of the Board's Committees.
In the event you received a letter titled "Notice of Investigation" from the Professional Conduct Program of the CFA Institute where the special investigator has opened an investigation to inquire further on some potential violation, then you have a relatively short window to research the matter, develop the most appropriate tact for refuting or mitigating the claims and to prepare a comprehensive response (& exhibits). Given the seriousness of PCP investigations, you may want to seek legal advice from an attorney with expertise with CFA PCP matters before you have any further communications with the special investigator. In particular, it is our experience that Covered Persons sometimes respond to the PCP via email with a "knee-jerk" reply and this can be counterproductive should you later engage counsel.
To be clear, the best chance for resolving any PCP matter with a favorable outcome is early-on with the assistance of a skilled attorney with extensive PCP defense expertise in CFA Institute investigations. For example, we frequently have prospective clients who didn't take the right course in their own initial response and are later presented Statement of Charges with severe sanctions, and then plead for legal expertise assistance after the initial response stage is botched. This is problematic for a favorable outcome as the die has largely been cast and when you engage an attorney at a late stage, the options for a favorable outcome becomes challenging.
The CFA Institute's Professional Conduct Program is not required to operate and adhere to the codification of the general laws of the United States. Covered Persons being investigated, responding to the Statement of Charges or facing a Hearing Panel (or Appeal) have limitations given the CFA Institute essentially operates as a “private club” with their own Professional Conduct codes, standards, rules and procedures. For example, discovery requests, subpoena powers for PCP witnesses, the ability to cross examine witnesses, the ability to file motions, summary judgment and so forth are largely absent. Therefore, obtaining legal counsel from attorneys with little to no experience with the CFA Institute’s Code of Ethics & Standards of Professional Conduct is of dubious utility. However, the CFA professional conduct area is a practice in which we offer specialized counsel, and we believe this makes our firm unique. Our body of knowledge on matters related to the CFA's PCP grows and advances with every client and we look to bring this advocacy experience to render the best possible outcome in both exam and industry-related cases.
Diana Lytel also spearheads reinstatement submissions for a Covered Person who received a prohibition from participating in CFA Institute exam programs or revocation of membership and/or the right to use the CFA designation. Our firm has experience representing those who wish to seek CFA Institute reinstatement, particularly those with permanent suspension status that have reached the term of the five-year prohibition period, which includes the written submission and legal representation during the live zoom hearing where the panel evaluates evidence, witnesses, oral statements and other conduct-related circumstances that might arise. However, we recommend that should a prospect client wish to seek reinstatement with our legal expertise, then we urge the Covered Person to have our firm involved early on, even prior to the request for reinstatement.
Our law firm is not interested in handling a large number of Professional Conduct cases – and for good reason. Lawyers handling a high volume of PC cases often struggle to provide the attention clients deserve. Also, we will only work with clients in which the firm believes it can help achieve a more positive outcome; in turn, some CFA PCP matters are 'cut & dry' to where legal counsel will not impact the final outcome. Finally, our selectivity of cases affords us the time, effort and responsiveness associated with the highest level of client satisfaction.
The types of CFA Code of Standards for Professional Conduct Program (PCP) Matters we handle:
Standard I: Professionalism
- Knowledge of the Law
- Independence and Objectivity
- Material Nonpublic Information
- Market Manipulation
Standard II: Integrity of Capital Markets
- Material Non-Public Information
- Market Manipulation
Standard III: Duties to Clients
- Loyalty, Prudence, and Care
- Fair Dealing
- Performance Presentation
- Preservation of Confidentiality
- Additional Compensation Arrangements
- Responsibilities of Supervisors
Standard V: Investment Analysis, Recommendations, and Actions
- Diligence and Reasonable Basis
- Communication with Clients and Prospective Clients
- Record Retention
Standard VI: Conflicts of Interest
- Disclosure of Conflicts
- Priority of Transactions
- Referral Fees
Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate
- Conduct as Participants in CFA Institute Programs
- Reference to CFA Institute, the CFA Designation, and the CFA Program
The Professional Conduct Program monitors member and candidate compliance with ethical standards through:
- self-disclosures
- written complaints
- internal initiatives
We Advise clients during the Investigation of conduct and allegations
Alleged violations of the code and standards are investigated according to the CFA Institute Bylaws and Rules of Procedure for Professional Conduct. The Professional Conduct Program investigates both exam- and industry-related conduct.
The CFA Institute takes PCP matters very seriously and in many cases Covered Persons under investigation by PCP Special Investigators should consider retaining legal counsel. Indeed, CFA Charterholders, CFA Institute Candidates (Level 1-3) and CFA Institute Members work very hard to achieve the coveted goal of a CFA Charter and it is only logical that everything should be done to protect yourself from potential sanctions, along with your membership in the CFA Institute.
Although the Professional Conduct Program investigations are statistically infrequent, the number of ongoing active investigations are still sizable on an absolute number basis: PCP Special Investigators have heavy case loads with the PCP investigating roughly 270-340 "industry" cases per year and about 1,400-1,500 "exam" related cases annually. Thus, depending how complex your case is or how detailed your response is, the timeframe of being involved in the PCP matter until conclusion can be anywhere between roughly 45 days-to-9 months after your official response date.
However, if you don't receive a letter that indicates "the investigation has been concluded and no further inquiry is warranted" (industry-related), or that "the exam results will be made available online in 3-5 days with no further inquiry into this matter is warranted" (exam-related), then there will likely be a Statement of Allegations (SOA) or a Statement of Charges (SOC).
Insofar as many PCP investigation inquiries may only require an honest, logical response that offers transparency and full disclosure - combined with factual documentation & supporting evidence - other cases can be far more serious. Indeed, we have found that it is not uncommon for our client PCP responses to have a multi-tiered approach which could include a complex defense encompassing many factors, such as: comprehensive analysis using CFA Code of Standards, CFA Institute's own case examples, the exploitation of inconsistencies in PCP's case, supporting witness testimonials, peer/professor/work testimonials, expert witness opinions, historical cases setting a precedent of past lower PCP imposed sanctions, etc. Again, ideally, legal counsel should be attained at the onset of the matter since it is our experience your best chance of resolving the case with a positive outcome is during the investigation phase.
Thus, the optimal decision is to at least discuss the matter with someone having experience with PCP disciplinarian matters. If we can't assist, at least we can offer some guidance. However, in many cases we are well equipped to help resolve the PCP issue before the matter escalates. The reality is when we are engaged after the case has been partially muddled with an ineffective initial response, then we inherit limitations in our legal defense approach.
Unfortunately, many times Covered Persons' response letters can have many flaws in terms of disclosures, supporting evidence and the overall letter tone. For example, letters having a contentious, confrontational, defensive, indignant or non-compliant tenor can be counterproductive to achieving the Covered Person's objective. Simply put, having a neutral-third party advocate during the response phase or with any potential SOC defense can be advantageous. Also, language barriers for foreign Covered Persons may be a disadvantage during the US-based PCP investigation.
- Exam-related conduct — Any activity or conduct related to participation in CFA Institute programs and any conduct that could compromise the reputation, integrity, validity, or security of the exams
- The Exam-Related Case Flow: PCP begins investigation & candidate exam results held. PCP investigates matter, collect and analyzes evidence. Based on preponderance of evidence, PCP determines how to proceed: either a) Lack of sufficient evidence, case closed & exam release, or b) Sufficient evidence, PCP sends CP (Covered Person) Statement of Charges. Here, CFA Institute member either accepts or rejects Statement of Charges with an early resolution. If the CP rejects the Statement of Charges, then the violation matter is referred to Hearing Panel. Hearing Panels are five voting members that will review your case in 60 days. Finally, there is an Appeal Process if there is a sanction of prohibition from participation in a CFA Institute exam program. All matters are determined by the preponderance of evidence standard which is essentially a "more likely than not" threshold. WARNING: THE PCP TAKES A HARD LINE ON EXAM CHEATING ALLEGATIONS AND IT IS RELATIVELY COMMON THAT THE STATEMENT OF ALLEGATION FOR EARLY RESOLUTION IS PERMANENT PROHIBITION/SUSPENSION FROM THE CFA PROGRAM. Hence, we never take any client cheating allegation lightly and the best option is to attempt to mitigate the sanction risks at the initial response phase.
- Exam-related conduct client review: "I'm happy to deliver some very good news. The CFA dropped the case and will be releasing my results over the next week. Thank you so much for all your hard work through this process. None of this would have been possible without you. If by chance I run into anyone going through the same situation in the future, I will be certain to send them your way." CFA Level II Candidate (initials "KN")
- Exam-related conduct client review: "I just received my verdict from the CFA, and they have determined that there is no need for further inquiry! Thank you so much for your help through this process. I honestly don't believe this result would have been possible without your help" CFA Level II Candidate (requested "Anonymous")
- Industry-related conduct — Any activity or conduct, excluding exam-related conduct, governed by the Code of Ethics and Standards of Professional Conduct
- The Industry-Related Case Flow: PCP gets self-reported conduct or obtains information on conduct, leading to inquiry. Professional conduct investigator is assigned and collects then analyzes evidence. Based on preponderance of evidence, PCP determines how to proceed: a) Lack of evidence, case is closed with no action and CP receives letter closing case, or b) Evidence of violation, PCP sends Charterholder or CFA Institute Member Statement of Allegations (SOA). Charterholder or Candidate then has an opportunity to respond to SOA. PCP then determines based on preponderance of evidence if evidence is negated where case is closed, or that it is more likely than not the Covered Person committed a violation and a disciplinarian action is warranted. The Covered person may either accept or reject the Statement of Charges (SOC) within 21 days. If the Covered person fails to respond in 21 days, then the SOC will be deemed accepted and will refer the matter on those terms to the Review Panel. If, however, the Covered Person rejects the SOC within 21 days of the date of the notice, then the PCP will either continue the investigation or refer the matter to the Review Panel. If the Review Panel finds the conclusion as to the violation(s) and the recommended sanction(s) reasonable, then the Panel will impose the recommended sanction(s). If, however, the Review Panel rejects the conclusion and/or recommended sanction(s) then, the Panel will also reject the SOC. If the Covered Person or Review Panel reject the SOC, the matter will move to a Hearing Panel, which would be scheduled for a convenient date for all parties within 40 days. The DRC will appoint five voting members who would conduct the hearing by either telephone, video conference, or written submission. All matters are determined by the preponderance of evidence standard which is essential a "more likely than not" threshold. An appeal of the Panel ruling is only available for: suspension of the right to use the CFA designation, revocation of membership, revocation of the right to use the CFA designation, or the prohibition of participation in a CFA Institute Exam Program.
- Industry-related conduct client review: "Diana, Thank you for your assistance, advice and counsel with the suitability of investment investigation by the PCP. Your guidance and response strategy and detailed advice on my defense approach was instrumental in the case being concluded with no further inquiry warranted. (CFA Charterholder initials "KL")
- Industry-related conduct client review: "Hi Diana, Couldn't ask for better news!" (CFA Charterholder initials "JW")
Potential Sanctions:
Revocation Summary of Suspension Felony/Bar – Summary of Suspension - Non-Cooperation Prohibition from Participation in the CFA Program Timed Suspension – Five Years Timed Suspension – Three Years Timed Suspension – Two Years Timed Suspension – One Year Timed Suspension – Nine Months Timed Suspension – Six Months Timed Suspension – Three Months Censure – Private Reprimand
You are entitled to a specialized CFA legal defense attorney during 1) Professional Conduct investigation, 2) Covered Person formal written PC response and 3) defense during any potential disciplinary hearing. Our goal is to mitigate the potential negative outcome and have the Covered Person receive a letter that states "we have determined that no further inquiry into this matter is warranted. As such, we consider our investigation concluded," or to only receive a cautionary letter. In more severe cases, we simply seek the best result within the scope of potential sanctions.
Sanction types are based on the Rules of Procedure for Professional Conduct (Rule 1.6) and include:
Private Reprimand
- An admonishment in writing where the Notice of Disciplinary Action includes only the conduct, excludes the Covered Person's identifying information, and will not be disclosed to third parties upon request.
- Previously referred to as Public Censure. An admonishment in writing where the Notice of Disciplinary Action will include the conduct, may include the Covered Person’s identifying information, and will be disclosed to third parties upon request.
- Covered Person’s memberships in CFA Institute and member societies are terminated for a specified period of time.
- Covered Person’s memberships in CFA Institute and member societies, as well as the right to use the CFA designation, are terminated for a specified period of time.
- Covered Person’s memberships in CFA Institute and member societies are permanently terminated.
- Covered Person’s memberships in CFA Institute and member societies, as well as the right to use the CFA designation, are permanently terminated.
- Covered Person’s membership in CFA Institute and/or member societies and/or the right to use the CFA designation and/or participate in the CFA Program is automatically terminated.
- Covered Person’s participation in the CFA Program is terminated for a specified period.
- Covered Person is permanently barred from participation in the CFA Program.
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