Standard IV: Duties to Employers

IV(A) Loyalty: what you owe the firm

In matters related to employment, members must act for the employer's benefit and must not deprive it of their skills, reveal its confidential information or otherwise harm it. This includes following the employer's policies, as long as they do not conflict with the law or the Code. The order of priority is clear: clients first, then employer, then yourself.

Loyalty is not total. The standard does not require you to sacrifice important personal or family obligations; talk to your employer if personal matters regularly interfere with work. Employers do not have to follow the Code, but they should not set policies that conflict with it, and senior management should design pay structures that do not reward unethical behaviour. Giving your employer a copy of the Code is encouraged.

Independent practice: you may do outside work that competes with your employer only after telling it the type of services, expected duration and compensation, and receiving its consent to all the terms. 'Practice' means any service the employer offers for pay; making preparations is not yet practising.

Whether you are an employee or an independent contractor depends on how much control the firm has: set hours and location, facilities provided, expenses reimbursed, other employers. An unpaid intern who uses firm resources is still treated as an employee. A contractor's duties are set by the agreement with the client.

Whistleblowing: client and market integrity outrank loyalty to the employer. Actions that would normally breach loyalty, such as ignoring instructions or copying records as evidence, can be justified when the employer is doing something illegal or unethical, but only if the aim is to protect clients or markets, not personal gain.

Leaving an employer

Until your resignation takes effect, you owe full loyalty. You may make preparations, such as registering a new company on your own time, as long as you do not compete or solicit. Activities that point to a violation, especially in combination: misappropriating trade secrets or client lists, misusing confidential information, soliciting clients before leaving, and self-dealing (taking a business opportunity that belongs to the employer). Responding to a client's request for proposals in competition with your still-current employer is direct competition.

Do not take records or files of any kind (paper, e-mail, home computer, phone) without written permission, even those you created yourself. Erase or return work stored at home. Once notice is given, follow the firm's procedures for telling clients you are leaving.

After you leave, your skills and experience are yours, and the mere names of former clients are generally not confidential. You may contact former clients using public information (directories, public records) unless a noncompete or non-solicitation agreement prevents it. Industry protocols that let departing staff take limited contact information can be relied on only if all their steps are followed.

Social media: firm-approved business accounts are firm property and must be handed over or closed as policy dictates. Best practice is separate personal and professional accounts. Updating your profile to announce a move should wait until the firm has handled client notification and your employment has ended.

IV(B) Additional Compensation Arrangements

Members must not accept gifts, benefits, compensation or other consideration that competes with, or might reasonably be expected to create a conflict with, the employer's interest unless they obtain written consent from all parties involved. An e-mail that can be documented counts as written.

The reason is that outside pay can shift loyalties: a client offering a personal bonus for strong returns might lead the manager to favour that account. The employer is also entitled to know the true cost of your services. Non-cash benefits count too: free club memberships for serving on a company's board, or a holiday home offered by a client if returns exceed a target.

Compare with I(B): a simple thank-you gift from a client needs disclosure to the employer; an arrangement of extra pay or benefits for services, especially one tied to future performance, needs written consent first.

• Recommended procedure: make an immediate written report to your supervisor and compliance officer of any proposed extra compensation.
• State the terms: the nature of the compensation, the approximate amount and the duration.
• Have the details confirmed by the party offering it, including performance incentives offered by clients.
• Part-time employees should discuss limits on competing services during hiring; IV(B) then applies to those limits.

IV(C) Responsibilities of Supervisors

Anyone with employees under their control or influence is a supervisor, and must make reasonable efforts to ensure those people comply with laws, rules, regulations, firm policies and the Code, whether or not they are CFA members or candidates. Supervisors need in-depth knowledge of the Code. Supervision may be delegated, but the delegate must be told how to prevent and detect violations.

Reasonable supervision means prevention and detection through an adequate compliance system: procedures established, documented, communicated and followed, plus regular training and incentives that reward ethical conduct, not only results. Procedures must exist before violations occur and should target the activities most likely to go wrong.

If the firm has no adequate compliance system, the supervisor should bring this to senior management and recommend fixes; if supervision is impossible without one, decline in writing to accept supervisory responsibility until reasonable procedures are adopted.

When a supervisor learns of a possible violation, they must promptly investigate its extent. Relying on the employee's assurance it will not happen again, reporting it up the chain, or simply warning the employee is not enough. Pending the investigation, limit the employee's activities or increase monitoring. A supervisor with reasonable procedures is not in violation just because a violation slips through undetected, but is if they know or should know the procedures are not being followed.

Code of ethics versus compliance procedures: keep them separate. The code should state broad ethical principles in plain language for everyone (and can be given to clients); detailed compliance procedures put those principles into daily practice.