The Investment Advisor Body of Knowledge + Test Bank - IMCA

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fully disclose the nature and amount of any and all compensation, direct and indirect, paid to a nonaffiliated third party who refers, solicits, or otherwise assists the consultant in obtaining clients.

      Explanation

      Subject to the law and/or regulations of any governmental or regulatory body, nothing in these standards precludes consultants from compensating a nonaffiliated third party for referring, soliciting, or otherwise assisting the consultant in obtaining clients. IMCA believes, however, that it is in the best interests of the public that all financial arrangements, direct and indirect, associated with the relationship between the consultant and clients or prospective clients be fully disclosed. Disclosure of financial arrangements between consultants and third-party solicitors also is consistent with the spirit of the disclosure provisions of the IMCA Code of Professional Responsibility.

      Procedures for Compliance

      In addition to the disclosure that may be required by federal or state law and regulation, the amount and nature of the compensation paid or payable to the third-party solicitor must be fully disclosed in the written contract and/or written services agreement between the consultant and client.

      Impact of the Standard

      This standard ensures that all clients and prospective clients can be confident that a full disclosure will be made of all financial arrangements between consultants and third parties, including third-party solicitors, associated with the relationship between the client and consultant.

      STANDARD 3F – A CONSULTANT'S PERFORMANCE REPORTING GUIDELINES RESPONSIBILITY TO COMPLY WITH IMCA

      Consultants have a responsibility to use their best efforts to comply with the mandatory requirements and disclosures of IMCA Performance Reporting Guidelines and to use reasonable efforts to comply with the recommended requirements and disclosures of those guidelines.

      Explanation

      IMCA believes that the best interests of the public are served by the adoption of a uniform and consistent approach to the analysis and reporting of performance information for manager search and analysis and performance measurement reporting. Therefore, the IMCA Performance Reporting Guidelines cover the collection, analysis, and reporting of performance information for manager search and analysis and performance reporting.

      These guidelines stress the importance of providing accurate and comparable investment performance information and appropriate disclosures to clients during manager search and analysis and performance measurement reporting. The mandatory and recommended disclosures relate to the preparation of information provided to the client or prospective client as well as to the disclosure of potential conflicts of interest, relevant business relationships, and other pertinent items.

      Procedures for Compliance

      IMCA recognizes that the terms “best efforts” and “reasonable efforts” are subject to interpretation. IMCA further recognizes that the employment status of consultants includes individuals who control the policies of their firms as well as persons who have little or no influence or control over the policies of their firms.

      For consultants who control the policies of their firms, the term “best efforts” shall mean that the consultant must comply with the mandatory requirements and disclosures of the IMCA Performance Reporting Guidelines. For those consultants who do not control the policies of their firms, the term “best efforts” shall mean that if the firm does not comply with the mandatory requirements and disclosures of the IMCA Performance Reporting Guidelines, the consultant must submit a written request for compliance to those persons who control firm policies. Further, to the extent that consultants who do not control the policies of their firms can reasonably comply with the mandatory requirements, and such compliance is not in conflict with the policies of their firms, the consultant must comply.

      All consultants also must take reasonable efforts to comply with the recommended requirements and disclosures of the guidelines. In determining whether efforts to comply are reasonable, consultants should take into consideration, among other things, their position with the firm and their ability to influence and/or control firm policy, available personnel and technological resources, and the time and costs that are required to comply with the recommended requirements.

      Impact of the Standard

      Compliance with the IMCA Performance Reporting Guidelines instills confidence in the public that manager search information and client performance reporting are being presented fairly and accurately. Compliance with the guidelines also enables clients to make informed investment manager-selection decisions and manager-performance evaluations.

      Standard 4: Responsibilities to the Profession

      STANDARD 4A – A CONSULTANT'S RESPONSIBILITY TO MAKE PROPER USE OF PROFESSIONAL CERTIFICATIONS

      Consultants have a responsibility to use care in promoting their professional certifications, including the CIMA® and CIMC® certifications.

      Explanation

      To maintain the status implied by a professional designation, consultants who have earned such certifications should display their accomplishments in a proper and dignified manner.

      Procedures for Compliance

      Holders of professional certifications must present the mark correctly, e.g., Certified Investment Management Analyst or CIMA licensees, and Certified Investment Management Consultant or CIMC licensees, and may use the marks only if currently entitled to do so. On signage, business cards, or stationery, the mark may not be listed in words larger than the certificant's name. Marks may not be misrepresented in any way.

      Impact of the Standard

      Compliance with this standard conveys professional courtesy and fairness and promotes respect for professional certifications.

      STANDARD 4B – A CONSULTANT'S RESPONSIBILITY TO ABIDE BY REGULATIONS AND PRINCIPLES

      Consultants have a responsibility to make every effort to understand and comply with regulations and rules that are applicable to their specific positions and duties.

      Explanation

      In addition to the standards presented in this booklet, consultants are governed by various rules, including fiduciary obligations, statutes of government regulatory agencies, and rules of self-regulatory organizations. These rules and standards should be followed at all times.

      Procedures for Compliance

      Consultants must maintain knowledge of all rules and regulations that govern their profession. They must abide by these rules or obtain exceptions from the appropriate authority as necessary.

      Impact of the Standard

      Compliance with all applicable rules and regulations ensures that the integrity of the consulting profession is upheld, competition is fair, and clients are well served.

      STANDARD 4C – A CONSULTANT'S RESPONSIBILITY TO MAINTAIN KNOWLEDGE BASE THROUGH CONTINUING EDUCATION

      Consultants have a responsibility to stay current with changes in their field and to expand their knowledge beyond the formal coursework taught in the pursuit of a designation. This is achieved primarily through continuing education.

      Explanation

      As times change, new ideas, investments, and laws are introduced constantly. To ensure that clients are well served, consultants must stay abreast of these changes and maintain competency in their profession.

      Procedures for Compliance

      At a minimum, a consultant who holds a professional certification shall fulfill the continuing education requirements established for that designation. Consultants also should keep informed about broader issues involving the fields of investment management and investment consulting. Fulfilling this obligation may require more than attending the minimum number of classes needed to maintain a professional designation. A consultant could fulfill this responsibility

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