3.3) Duties to clients III (E) : Preservation of confidentiality

Question 1

What does substandard 3(E) preservation and confidentiality state? (1x3)

Answer 1

Keep info about current, former, and prospective clients confidential unless:
* info concerns illegal activities,
* disclosure is required by law, or
* the client/ prospective client permits disclosure of the info

Question 2

What is substandard 3(E) of Duties to clients?

Answer 2

Preservation and Confidentiality

Question 3

How is preservation of confidentiality implemented by members? (3)

Answer 3

• Applies to current, past and prospective clients.
• Disclosure required by law overrides this standard.
• If illegal activities are involved, members are obligated to report these to authorities.

Question 4

Example 30: Lungi Rabada, a very wealthy individual, mentions to Kagiso Ngidi, his financial advisor, that he is looking for a deserving charity in education to
make a donation to. Two days later, a friend of Ngidi’s mentions that he is involved in a very deserving disadvantaged schools project that is desperately
looking for funding. Ngidi suggests that his friend phones Rabada to discuss his requirements. Is Ngidi’s action in contravention of Standard III(E)?

Answer 4

Solution: Even though Ngidi is probably doing Rabada a favour, he is, under Standard III(E), not allowed to divulge any info given to him by a client. Rabada did not explicitly give him permission to let someone else known about his
potential donation. Ngidi should have obtained Rabada’s consent before suggesting to his friend that he contacts Rabada.

Question 5

Example 31: Dave Du Plessis is financial advisor to Heather Cronje. Based on some of Cronje’s comments and investment requests, Du Plessis comes to the
conclusion that Cronje is involved in tax evasion. According to Standard III(E), what should Du Plessis do?

Answer 5

Solution: Although Standard III(E) protects confidentiality, in this case Du Plessis suspects illegal activity. He should therefore confer with his company’s compliance function and possibly obtain outside legal advice as to whether he is obliged to report his suspicions to the authorities.