CFA Level IEthical and Professional StandardsHard
An investment analyst is planning to leave her employer to start a competing firm. While still employed, she downloads her firm's confidential proprietary client contact list and internal valuation models to use immediately upon departure. She has not yet resigned. This conduct most likely violates:
- AStandard IV(B) Additional Compensation Arrangements, because she is preparing to earn income from a competing business
- BStandard IV(A) Loyalty, because she misappropriated confidential employer property while still employed
- CNo standard, because employees are always free to use skills and knowledge gained on the job at a new employer
- DStandard III(E) Preservation of Confidentiality, but only after she formally resigns
Show answer & explanationAnswer & explanation
Correct answer: B. Standard IV(A) Loyalty, because she misappropriated confidential employer property while still employed
Standard IV(A) prohibits members from taking employer property, including confidential client lists and proprietary models, for use at a competing business, even before formally resigning. General knowledge and skills may be used freely, but misappropriated confidential materials cannot.
Why the other options are wrong
- A. IV(B) concerns undisclosed outside compensation, not theft of confidential materials.
- C. General skills are fine to reuse, but confidential client lists and models are not.
- D. The violation occurs at the time of taking the material, regardless of resignation timing.
Loyalty to Employer (IV(A))
Members must act for the benefit of their employer and not misappropriate confidential information, trade secrets, or client lists for personal or competitive use.
- General industry knowledge and skills may be taken to a new job
- Confidential records, client lists, and proprietary models may not be taken
- Violation occurs at the time of misappropriation, not at resignation
Memory trick: Take your skills, leave the files.