Standard III(C) – Suitability
Standard III(C) – Suitability refers to providing recommendations and transactions that align with... Read More
Standard IV outlines basic responsibilities by investment professionals for their employers.
Standard IV(A) – Loyalty requires CFA members from behaving in a way that would negatively impact their employer’s reputation or deprive it of profit.
Members must always be loyal to clients first; however, they have a responsibility to act in a way that sustains the integrity of their firm. Members are obligated to comply with employer policies and procedures to the extent that they are lawful. Employers are not obligated to comply with the CFA Institute Code and Standards. However, to the extent that they expect to recruit and retain quality employees, employers should not develop policies that conflict with these codes.
In all cases, CFA members must refrain from independent activity that conflicts with the best interest of employers. Should an investment professional wish to engage in an independent activity, his/her employer should be notified and permitted to evaluate potential conflicts.
A special mention related to the separation of employment specifies that some aspects of employment cannot be left behind or forgotten, such as learned skills; simple information that can be recalled from memory; and names of former clients; the departing employee should not exploit confidential documents and intellectual property belonging to an employer.
It may be tempting for departing employees to take clients’ lists, recommended lists of securities, and the like. However, even if a CFA member is very careful not to alert current clients about a separation from the employer before the departure, taking any documents from an employer violates Standard IV(A) – Loyalty. This extends to documents prepared for an employer by the departing employee.
Activities that could conflict with loyalty to an employer include misuse of proprietary information, sharing of confidential material, behaving in one’s own interest rather than an employer, and misappropriation of client lists.
Related to ethical violations by employers, a CFA member’s loyalty to employers must be secondary to that of protecting the integrity of capital markets and duty to clients. In cases of conflict with laws and the Code of Standards, it may be acceptable for a member to act in a way that is counter to an employer’s policies. Additionally, rather than commit a violation of the Code of Standards, members are encouraged to inquire with the CFA Institute’s Professional Standards and Policy Committee (PSPC).
Question
Maria Wells resigned from Tru-tech Corporation as a market analyst. She has accepted a position with a company overseas who operates in a different industry, not directly competing with Tru-tech. When packing up her office, she found a bound copy of an analytical sector report that she’s particularly proud of. Wells knows that to take the electronic version of this information would be a violation of Standard IV(A) – Loyalty since it is proprietary to Tru-tech. However, Wells takes a single hard-copy to satisfy her nostalgia. Wells is:
- Not in violation of Standard IV(A) – Loyalty since she didn’t take the electronic root document, and only a single hard-copy of the completed analysis.
- In violation of Standard IV(A) – Loyalty because taking proprietary documents from an employer is prohibited.
- Not in violation of Standard IV(A) – Loyalty because the work was compiled by her; therefore, it is her property.
Solution
The correct answer is B.
Wells is in violation of Standard IV(A) – Loyalty, which prohibits CFA members from taking any form of documentation from an employer at time of separation, even when that document has been prepared by the CFA member in question.