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Put the Loyalty to Employers standard, IV(A), into practice

CFA® Level I · Ethical and Professional Standards · Guidance for Standard IV: Duties to Employers · ET.6.a

The idea

Members must act for the benefit of their employer and must not deprive it of the advantage of their skills, divulge confidential information or otherwise cause harm. Engaging in an independent business for compensation while employed requires notifying the employer of the types of services, their expected duration and the compensation, and not rendering them until the employer has consented to all the terms. The Standard does not require the outside party's consent. Before resigning, a member may make preparations to compete but may not take employer property — client lists, models, research — or solicit clients while still employed. After leaving, a former employee may contact former clients using publicly available information, provided no non-compete agreement says otherwise and nothing taken from the employer is used.

A practice question

From the question bank, with the reason each wrong option is wrong.

May a member solicit the employer's clients while still employed?

  1. Yes, if they have already given noticeWhy not: The duty runs until the employment ends, not until the member has announced that it will.
  2. No, that is competing while still employed — correct
  3. Yes, for clients the member originally introducedWhy not: Introducing a client does not make the relationship the member's to take, since it was serviced on the employer's account.

Standard IV(A) prohibits competing with the employer while still owing it loyalty. Soliciting its clients before departure is exactly that.

A harder one

May a member preparing to leave take copies of models they personally built while employed?

  1. Yes, since they created themWhy not: Having built something does not make it the member's to take, since it was produced on the employer's time and resources.
  2. No, work made in employment is the employer's — correct
  3. Yes, provided the models use only public dataWhy not: Public inputs do not change who owns the model built from them, which is the employer's work product.

Standard IV(A) treats work produced in the course of employment as the employer's property, whoever built it. Authorship is not ownership.

The hardest tier

After joining a competitor, may a member contact clients of their former employer?

  1. No, former clients may never be contactedWhy not: The duty of loyalty ends with the employment, and a permanent bar would amount to a non-compete the member never agreed to.
  2. Yes, using the former employer's client list if the member memorised itWhy not: The list is information from the employer's records, and using it to solicit clients is not allowed however it was carried out. Simply knowing who former clients are is not confidential; the firm's client list is.
  3. Yes, from public information and nothing taken — correct

Standard IV(A) ends with the employment. A former employee may compete using publicly available information, provided no non-compete applies and nothing taken from the employer is used.

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