3.4) Duties to Employers IV (A): Loyalty Flashcards
What is the substandard 4(A) of duties to employers?
Loyalty
What does 4(A) Loyalty refer to?
Must act for the benefit of employer and not deprive employer of the advantage of their skills and abilities, divulge confidential info, or otherwise cause harm to their employer.
Do not engage in any activities that would _____ the firm, deprive it of profit, or _______ it of the full benefit of employees’ skills and abilities
harm
deprive
Whose interests should members place first?
Members should always place client interests above interests of employer but consider the effects of their actions on firm integrity and sustainability
True or false, confidentiality is important
True
True or false, Outside work for compensation is not allowed if employer is fully informed of, and agrees to, all aspects.
False, Outside work for compensation is allowed if employer is fully informed of, and agrees to, all aspects.
What must a member do when leaving an employer?
When leaving an employer, must act in employer’s best interests until they leave. No taking of confidential info, misappropriation of IP (e.g. models, reports),
soliciting of clients prior to leaving, and client databases etc.
What are the other implementations of loyalty for members? (3)
- Use of skills, experience and contacts gained at previous employer not prohibited.
- Restraints of trade often used by employers.
- Personal and employer’s interests secondary to protection of client interests and integrity of capital markets. “Whistleblowing” allowed if for this purpose.
Example 32: Jane Jones is working as an unpaid intern at Novelty, where she is tasked with conducting an analysis of Cape Engineering. She does not have any
contractual obligation to Novelty, and plans to take her research notes with her when she starts to work at Indigo Finance, which has just offered her permanent
employment. Has Jones contravened Standard IV(A)?
Solution: According to Standard IV(A), Jones does not have the right to take her research material with her. She should also allow Novelty to act on her report
before Indigo does.
Example 33: Dominic Petersen works for Citi Consultants, but is planning to start his own asset management consultancy firm. He has not informed his
employer of this yet, and is busy registering his new company and preparing his own marketing material. Is Petersen in contravention of Standard IV(A)?
Solution: Petersen is entitled to make preparations for his own business provided it does not interfere with his current job (i.e. he does not do this on company time), and he does not use any company resources or info for this. Thus, based on the info given he has not violated Standard IV(A).
Example 34: Amy Naidoo is a senior portfolio manager at AHC, but has decided to start her own asset management consultancy firm. Naidoo does not let any
clients know about this, nor does she plan to take any of her employer’s models or investment recommendation reports. However, she does not plan to erase
the client list on her personal laptop, and is intending to use a copy of one of AHC’s marketing presentations as a template for her own presentation. Has Naidoo contravened Standard IV(A)?
Solution: Naidoo will be in breach of Standard IV(A) unless she erases the client list on her laptop when she leaves, and refrains from using (or copying) her employer’s marketing presentation. Under this standard she is not allowed to retain, take or use any of her employer’s info or property once she resigns.
