Standard IV (A) - Loyalty
This standard has three parts:
- Additional Compensation Arrangements
- Responsibilities of Supervisors
This standard states that the members must always act in favour of their employer, and works towards benefiting their employers. They should not indulge in activity that could harm their employer.
There may be situations where the employee has to act against his employer in order to protect the larger interests of the capital markets. In such cases, any activity that would otherwise violate this standard will be justified.
- If you are planning to engage in independent practice, he must notify the employer of the services you are providing, the duration of such services, and the compensation you will receive. You should not proceed without the formal consent of the employer.
- If you are looking for a new job, you should act in the best interest of your current employer until the last day of your service. When leaving the job, you should not take any files or records with you. There is no problem in having the simple knowledge of the names of your former clients, nor is it a problem to use your experience or knowledge gained in your previous job.
Examples of Violation
- Example 1: An employee after leaving employment from a firm, uses private information that he had obtained from his previous employer, to contact and solicit clients from the previous firm. This is a violation of the standard. However, if the information used by the employee was publicly available, then it will not be considered violation of law.
- Example 2: An investment analyst prepares an industry research report for his employer, which is not yet published. The analyst then gets another job with another investment firm, and allows the new investment firm to publish the report as theirs. This is a violation as the research was conducted as a part of his previous employment.
- Example 3: An investment manager who has just joined a new firm contacts his clients from the previous firm requesting them to shift their account to his new firm.
- Seven Standards of Professional Conduct
- Standard I (A) Professionalism - Knowledge of the Law
- Standard I (B) Professionalism - Independence and Objectivity
- Standard I (C) Professionalism - Misrepresentation
- Standard I (D) Professionalism - Misconduct
- Standard II (A) - Material Non-public Information
- Standard II (B) - Market Manipulation
- Standard III (A) - Loyalty, Prudence, and Care
- Standard III (B) - Fair Dealing
- Standard III (C) - Suitability
- Standard III (D) - Performance Presentation
- Standard III (E) - Preservation of Confidentiality
- Standard IV (A) - Loyalty
- Standard IV (B) - Additional Compensation Arrangements
- Standard IV (C) - Responsibilities of Supervisors
- Standard V (A) - Diligence and Reasonable Basis
- Standard V (B) - Communication with Clients and Prospective Clients
- Standard V (C) - Record Retention
- Standard VI (A) - Disclosure of Conflicts
- Standard VI (B) - Priority of Transactions
- Standard VI (C) - Referral Fees
- Guidance for Standard VII – Responsibilities of a CFA Institute Member or CFA Candidate
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