Rules of Procedure for Proceedings Related to Professional Conduct (1991)

Effective January 1, 1990, As amended August 1, 1991

I. JURISDICTION

The Association for Investment Management and Research ("AIMR"), its Professional Conduct Committee (the "Committee"), and other designated bodies and persons may take action as hereinafter provided in any matter involving the conduct of (1) a regular or affiliate member of AIMR, (2) a regular or affiliate member of the Financial Analysts Federation, (3) a regular or other member of the Institute of Chartered Financial Analysts, and (4) any person who has been awarded, or is a candidate for, the professional designation Chartered Financial Analyst ("CFA Charter") (together referred to herein as a "member"). The Committee may exercise its authority and carry out its duties through subcommittees of at least three (3) members appointed by the Committee chairman.

II. REGIONAL COMMITTEES

The Chairman of the Board of Governors ("Chairman") shall, with the approval of the Board of Governors, designate regions for the administration of the disciplinary process pursuant to these Rules, In each region there shall be established a committee (referred to herein as a "Regional Committee") with the duties and powers set forth in the Bylaws and in these Rules. The chairman of each Regional Committee shall be designated from the region by the Professional Conduct Committee chairman ("Committee chairman"), and the members of each Regional Committee shall be appointed from the region by the Committee chairman with the approval of the Chairman as provided in the Bylaws. A Regional Committee may exercise its authority and carry out its duties through subcommittees of at least three (3) members appointed by the Regional Committee chairman.

With the approval of the Chairman and the Committee chairman, a Regional Committee may establish subcommittees to be responsible for separate functions as follows. One such subcommittee shall consist of at least three (3) members who shall investigate matters referred to the Regional Committee by the Designated Officer as provided below in Rule 111, It shall conduct investigations and exercise other duties and powers as provided in Rule V, and elsewhere herein, and shall be known as the Investigation Subcommittee. A separate subcommittee shall consist of persons not on the Investigation Subcommittee who shall be available to serve on hearing panels of the Professional Conduct Committee; such subcommittee shall be known as the Subcommittee for Hearing Panels. Persons on the Subcommittee for Hearing Panels shall not participate in or be furnished information relating to any investigation, nor participate in any functions of the Regional Committee or Investigation Subcommittee. Members of such subcommittees shall be appointed by the Committee chairman with the approval of the Chairman.

Ill. INITIAL PROCEEDINGS

The Executive Vice President of AIMR shall be the Designated Officer under these Rules until changed by the Board of Governors. The Board of Governors may designate another officer or a Governor of AIMR to act as the Designated Officer in the Executive Vice President's place in any matter and such person may continue to so act while an officer or a Governor of AIMR.

A complaint by a member or a non-member relating to the professional conduct of any member shall be made in writing directly to the Designated Officer. The Designated Officer shall conduct an investigation upon receipt of such complaint, which complaint may be furnished to the member, or on his or her own initiative upon receipt of information from any source relating to such conduct.

The Professional Conduct Program Administrator of AIMR, or the person exercising the functions of such position, shall assist the Designated Officer and the Regional Committees in performing their functions under if he Bylaws and these Rules. The Designated Officer may, if he or she determines if appropriate, furnish the member involved with a notice of inquiry including the complaint, the substance of the complaint or the possible violation and other materials received with the complaint or otherwise (the "notice of inquiry') and, if appropriate, requesting the member to respond within thirty (30) days. If the notice of inquiry does not contain such a request for response, the Designated Officer may subsequently make such request in writing at such time as the Designated Officer deems appropriate, With the initial notice of inquiry, the Designated Officer shall also provide the member with a copy of these Rules of Procedure, and copies of the Articles of Incorporation, Bylaws, Code of Ethics and Standards of Professional Conduct of AIMR. Proceedings hereunder shall be deemed to have commenced upon the furnishing to the member of the initial notice of inquiry. For purposes of these Rules, the requirement of giving or furnishing any notice or other document to a member shall be satisfied if such notice or document is mailed postage prepaid to the member at the last known address of the member shown in the records of AIMR. The member has the right to be represented by counsel in proceedings under these Rules.

After receipt of a response from the member, or of the expiration of thirty (30) days from the Designated Officer's written request for such response, whichever occurs earlier, or at such other later time as the Designated Officer deems appropriate, the Designated Officer shall determine if there is sufficient evidence of a possible violation to refer the matter to a Regional Committee for investigation pursuant to Rule V. If the Designated Officer determines that there is sufficient evidence to proceed, he or she shall submit the matter to the chairman of the Regional Committee for the region in which the member resides or conducts his or her business, or other Regional Committee, as the Designated Officer deems appropriate, or take other action under these Rules. If the Designated Officer determines that there is not sufficient evidence to proceed, then, except as provided in Rule IV, he or she shall notify the member and the complainant, if any, of his or her determination.

However, a complaint against a member made by an individual who is a non-member shall not be dismissed by the Designated Officer except with the concurrence of the appropriate Regional Committee chairman. If the Regional Committee chairman does not concur, the Designated Officer shall refer the matter to the Regional Committee for further proceedings under Rule V.

IV. PRIVATE REPRIMAND

If, upon completion of the investigation required under Rule 111, the Designated Officer concludes that the member has committed a minor violation of the Articles of Incorporation, Bylaws, Code of Ethics, Standards of Professional Conduct, or other rules of AIMR relating to professional conduct, the Designated Officer may impose a Private Reprimand on said member. The Designated Officer shall not impose a Private Reprimand under this Rule unless he or she has first obtained the concurrence of the Regional Committee Chairman for the region in which the member resides or conducts his or her business, as the Designated Officer deems appropriate. The Private Reprimand shall not be imposed until (1) the Designated Officer has furnished the member with a Notice of Inquiry (as defined in Rule 111), and (2) the member has been given an opportunity to explain his or her conduct.

After receipt of a response from the member, or at the expiration of thirty (30) days from the date the member is furnished with a notice of inquiry, whichever occurs earlier, the Designated Officer shall notify the member of a decision to impose the Private Reprimand (the "Notice of Reprimand"), and shall inform the member of his or her right to reject the Private Reprimand in accordance with this Rule.

A member who receives a Notice of Reprimand shall have the right to reject the Private Reprimand by submitting to the Designated Officer a written rejection within thirty (30) days of the receipt of the Notice of Reprimand. Failure to timely reject in writing shall constitute acceptance of the Private Reprimand. If the member rejects the Private Reprimand, the Designated Officer shall submit the matter to the Regional Committee for the region in which the member resides or conducts his or her business, as the Designated Officer deems appropriate, for further proceedings, in accordance with these Rules. Upon completion of such procedures, the Board of Governors may impose a Private Reprimand or any other sanction authorized in Rule VII.

If the member accepts the Private Reprimand, or fails to reject in writing within thirty (30) days of the receipt of the Notice of Reprimand, the determination of the Designated Officer and the imposition of the Private Reprimand shall be final and conclusive, In such event, the member shall be deemed to have admitted the violations, accepted the sanction, and waived all rights of appeal to the Regional Committee and the Board of Governors.

Imposition of a Private Reprimand may be announced publicly, in a manner determined by the Board of Governors, However, such publication shall not contain the name of such member.

V. REGIONAL COMMITTEE INVESTIGATIONS

A Regional Committee, or a subcommittee thereof appointed pursuant to Rule 11 above, shall conduct such additional investigation of matters referred to it by the Designated Officer as it deems appropriate. A Regional Committee and such subcommittee may use such procedures for the conduct of its business as the chairman thereof may determine. If a majority of the Regional Committee, or such subcommittee, determines that there is sufficient evidence of a possible violation, the Regional Committee, or such subcommittee, shall report its findings to the chairman of the Committee in the form of a statement of charges setting forth the substance of the alleged misconduct in sufficient detail to give the member a fair opportunity to understand, deny, and disprove the charges.

In any matter which has been referred by the Designated Officer to a Regional Committee where the Regional Committee determines not to file a statement of charges, the chairman of the Regional Committee shall submit a written report to the chairman of the Committee stating the basis for such determination by the Regional Committee.

VI. HEARINGS

Upon receipt of a statement of charges from the Regional Committee, the chairman of the Committee shall designate a hearing panel consisting of three or more members of the Committee or Regional Committees to hear the charges. The chairman of the Committee shall also designate one member of the hearing panel, which may include himself, to serve as presiding officer. No member of the Regional Committee which filed the statement of charges shall sit on the hearing panel, except for hearings in regions with a Regional Subcommittee for Hearing Panels as provided in Rule 11 above, members of such Subcommittee shall comprise at least a majority of the members of a hearing panel.

If a statement of charges has been filed by a Regional Committee with the Committee, that matter shall not be returned to the Regional Committee upon its request, except for good cause. The chairman of the Regional Committee must specify the good cause in writing requesting return of the matter to the Regional Committee.

The presiding officer of the hearing panel shall designate a date, time, and place for the hearing, and shall give the member thirty (30) days written notice thereof. The hearing shall be held in the region to whose Regional Committee the matter has been referred pursuant to Rule V above or other region as the chairman of the Committee deems appropriate. The notice shall include the statement of charges and shall inform the member of his or her rights: (1) to have a reasonable opportunity to be heard in his or her own defense, (2) to be represented by counsel, (3) to present witnesses and evidence, and (4) to cross-examine any witnesses. The member shall be invited to furnish such additional written information prior to the hearing as he or she may deem desirable. Such information and other material submitted by the member or delivered to the chairman of the Committee by the Regional Committee may be furnished to the members of the hearing panel as the chairman of the Committee deems appropriate, with copies or notification as applicable, furnished to the member.

The Committee may adopt procedures for the conduct of hearings (the 'Hearing Procedures"), consistent with these Rules of Procedure.

The chairman of the Regional Committee which submitted the statement of charges, or other Regional Committee as designated by the chairman of the Committee, or one or more of its members shall present the evidence of the alleged misconduct. All evidence shall be presented in the presence of the member, or his or her counsel or other representative, unless the member waives his or her right to be present or fails to appear after being given due notice; and except that material may be presented in advance to the hearing panel as provided in the Hearing Procedures. The hearing panel shall not be bound by the rules of evidence applicable in courts of law, but the presiding officer shall exclude matters which in his or her judgment are irrelevant. A transcription of the proceeding shall be made and shall be available to the member if requested by him in writing.

The hearing panel shall prepare a report of its findings and recommendations. The report shall include findings of fact related to the alleged misconduct of the member, and findings as to the violations, if any, of the Articles of Incorporation, Bylaws, Code of Ethics, Standards of Professional Conduct, and other rules of AIMR, or other basis for the disciplinary sanction, if any. The report shall be delivered to the member and to the chairman of the Committee. If the panel concludes, based upon its findings, that disciplinary action should be taken, the report shall also be delivered to the Board of Governors and shall contain a recommendation to the Board of Governors as to such disciplinary sanction. If the report is delivered to the Board of Governors, the member shall be invited to submit to the Board of Governors such written material related to the report as the member may deem desirable.

All findings of violation, and all recommendations for disciplinary sanction, shall be by majority vote of the hearing panel.

VII. ACTION BY THE BOARD OF GOVERNORS

If the hearing panel submits a report to the Board of Governors pursuant to Rule VI, the Board of Governors shall review such report and such other material as may have been submitted to it at its request or otherwise. Based on the report and such material, the Board of Governors shall make determinations and shall impose sanctions if a majority of the Governors present and voting finds such sanctions to be appropriate. The Designated Officer shall not vote on any disciplinary matter considered by the Board of Governors. No Governor shall participate in the deliberations or voting by the Board of Governors if the Chairman of the Board determines such Governor has a conflict in the matter.

The following sanctions may be imposed by the Board of Governors: (1) Private Reprimand, (2) Private Censure, (3) Public Censure, (4) Suspension of Membership, and Suspension of the CFA Charter, if applicable or (5) Revocation of Membership, and Revocation of the CFA Charter, if applicable. The Board of Governors may impose the same or a lesser sanction than that recommended by the hearing panel or in a Stipulation considered under Rule IX.

The Board of Governors shall communicate promptly to the member its determination, and its actions may be announced publicly, if appropriate, in the manner by the Board of Governors. A notice of a Private Reprimand or Private Censure shall rot contain the name of the member. Notices of other sanctions may contain the member's name.

VIII. SUMMARY SUSPENSION

Grounds for Summary Suspension. A member shall be suspended as provided in the Bylaws and in this Rule ("Summary Suspension") if he or she has been (1) convicted of a crime which is defined as a felony, or its equivalent, under the laws of the convicting jurisdiction, whether based on a plea of guilty or nolo contendere or a verdict after a trial, or otherwise, or (2) barred permanently, or for an indefinite period of time (even though reapplication may be made after a specific period of time), from registration under the securities laws or similar laws relating to investments or from association or affiliation with a registrant by a court, a governmental authority or a statutorily authorized self-regulatory organization, whether by decision after a hearing or trial or by consent, or otherwise, or (3) has failed for each of two successive years to complete, sign and return to AMR the required annual signed professional conduct statement in the form adopted by AIMR.

Notice of Summary Suspension. If the Designated Officer determines that an event described in (1), (2), or (3) above has occurred (in the case of (1) or (2), by receipt of a verified copy of such action), such person's membership in AIMR and, if applicable, such person's right to hold and to use the professional designation Chartered Financial Analyst shall thereby be suspended, which shall automatically suspend membership in the Financial Analysts Federation, the Institute of Chartered Financial Analysts and each member society of AIMR ("Member Society") which such person is a member, effective thirty (30) days after written notice thereof to the member or upon denial of a petition to stay the Summary Suspension, if any, as provided below. The Designated Officer shall notify the member of the Summary Suspension, of the member's right to petition for a stay thereof and, if the Summary Suspension becomes effective, to have a prompt review thereof in accordance with these Rules of Procedure.

Petition to Stay Summary Suspension. If the member submits to the Designated Officer a written petition to stay the Summary Suspension, setting forth the reasons therefore, within thirty (30) days from the date of the notice to him or her, the Designated Officer, the chairman of the Committee or a member thereof designated by the Chairman, and the chairman of the appropriate Regional Committee, or his or her designee, shall comprise an ad hoc committee to review such petition. If the petition is granted, the Summary Suspension shall not become effective. The petition will not be granted unless it clearly appears that, because of exceptional or unusual circumstances, it would be inequitable to permit the Summary Suspension to become effective. If the petition is denied, the Summary Suspension shall be effective as of the date of the denial. The member shall be notified of such determination, and, if the Summary Suspension becomes effective, each Member Society in which such person is a member shall be notified. Notice of such Summary Suspension may also be published in AIMR's newsletter or other AIMR publications as determined by the Designated Officer.

At any time after a member has received written notice of a Summary Suspension to become effective by reason of an event described in (3) of this Rule, and after the member has completed, signed, and returned the delinquent annual professional conduct statements, the Designated Officer has the discretion to stay or terminate the Summary Suspension, as applicable. If the member has not completed, signed, and returned the delinquent annual professional conduct statements, a member's petition to stay will be processed in the manner described in the preceding paragraph.

Review of Summary Suspension for Conviction or Bor. If a Summary Suspension becomes effective by reason of an event described in (1) or (2) of this Rule and the member submits a written request for review thereof to the Designated Officer within thirty (30) days of the date the Summary Suspension becomes effective, the Designated Officer shall promptly deliver such request to the appropriate Regional Committee and to the Chairman of the Committee, who shall proceed in the following manner, The Chairman shall promptly notify the member in writing of a time and place where the member may appear before a hearing panel of the Committee and have the opportunity to show that, because of exceptional or unusual circumstances, it would be inequitable not to terminate the Summary Suspension. This hearing shall fake place not more than thirty (30) days after receipt of the request for review (unless the member requests additional time). At this hearing, the member shall have a reasonable opportunity to be heard in his or her own defense and may be represented by counsel. The member may also furnish such additional written materials prior to the hearing as he or she desires, The chairman of the designated Regional Committee, or his or her designee, shall present matters to the Hearing Panel in support of the Summary Suspension. The Summary Suspension shall not be terminated unless the Hearing Panel determines that, because of exceptional or unusual circumstances, it would be inequitable not to terminate it. Within thirty days of this hearing, the Hearing Panel shall notify the member of its determination If the Hearing Panel determines rot to terminate the Summary Suspension, such notification shall contain a statement of reasons for the decision. Review of All Conduct. A Regional Committee may investigate, in accordance with Rule V of these Rules of Procedure, and may submit to the Committee for a hearing by a hearing panel, in accordance with Rule VI of these Rules of Procedure, all conduct of a member involved in a Summary Suspension by reason of an event described in (1) or (2) which are referred to it, regardless of whether or not a member's Summary Suspension is stayed by an ad hoc committee or terminated by a hearing panel. The chairman of the Committee may combine this hearing with the hearing described in the preceding paragraph.

The fact that a member has been suspended by a Summary Suspension shall not prevent the imposition of other disciplinary sanctions upon that member pursuant to these Rules of Procedure.

Review of Summary Suspension for Failure to File Annual Statement. If a Summary Suspension becomes effective by reason of an event described in (3) of this Rule and the member submits a written request to the Designated Officer for review thereof and complies with his or her obligation to file the annual professional conduct statements, the Designated Officer shall promptly review the matter and may, in his or her discretion, terminate the Summary Suspension. If the Designated Officer does not terminate the Summary Suspension and the member submits a written request for further review thereof to the Designated Officer, the request shall be processed in the manner described in the above paragraph entitled, "Review of Summary Suspension for Conviction or Bar."

Duration of Summary Suspension. A Summary Suspension, if not terminated, shall remain in effect until other action thereon is taken by the Board of Governors, upon the recommendation of the committee or an ad hoc committee thereof based on a request by the suspended member or on the Committee's initiative. If the suspension has been terminated a notice thereof may be published in AIMR's Newsletter or other AIMR publication as determined by the Designated Officer and it requested by the member.

Effect of Summary Suspension. The Summary Suspension shall suspend membership in AIMR, and shall automatically suspend membership in the Financial Analysts Federation, the Institute of Chartered Financial Analysts and each Member Society of which such person is a member, and shall suspend, if applicable, the right to hold and to use the professional designation Chartered Financial Analysts.

IX. STIPULATION OF FACTS AND OFFER OF CONSENT TO DISCIPLINARY SANCTION

The Designated Officer or a Regional Committee may, after appropriate investigations enter into a Stipulation of Facts and Offer of Consent to Disciplinary Sanction ("Stipulation") with the member, provided, however, that the member is informed of his or her right to a hearing under these Rules, and waives that right. The Designated Officer shall not enter into a Stipulation) with a member unless the Designated Officer has conferred with the appropriate Regional Committee chairman regarding the proposed Stipulation.

The Stipulation shall be signed by the Designated Officer or by the chairman or his or her designee of the Regional Committee, as applicable, and by the member; shall contain a summary of the facts related to the alleged misconduct; and shall state the sanction recommended by the Designated Officer or by the Regional Committee, and agreed to by the member. The Stipulation shall be forwarded to the Board of Governors which shall review the Stipulation and impose sanctions, if any. At the time the Stipulation is forwarded to the Board of Governors, it shall also be forwarded to the chairman of the Committee for review by a subcommittee of the Committee, which subcommittee shall be known as the Stipulation Review Committee. The subcommittee shall consist of three members from the Committee or from the Regional Committees designated by the chairman of the Committee and which may include the chairman of the Committee. The Stipulation Review Committee shall submit a report on the proposed Stipulation and its recommendations to the Board of Governors for the Board's assistance in making its determination. The Board of Governors shall give due consideration to the recommendations of the Designated Officer, or the Regional Committee, and to the report of the Stipulation Review Committee but shall not be bound by such recommendations or such report. The matter may be referred by the Board of Governors back to the Designated Officer, or the Regional Committee, as appropriate, for further investigation and action.

X. RECORDS

A record of all investigations, appeals, hearings, recommendations, determinations, and actions in all matters involving a member's conduct shall be preserved at the principal office of AIMR or at such other place as the Board of Governors may designate. Amended - May 21,1990, Rule IV added Amended - May 20,1991, Rule VIII revised Amended - August 1, 1991 Rule 11, 111, VI, VIII and IX revised