Violation of Standard III (B) - Duty to Employer

Duty to Employer Violations | CFA Level 1 Exam | Test Prep

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Question

Which of the following is NOT a violation of Standard III (B) - Duty to Employer?

Answers

A. Using the current employer's client list for personal independent practice.

B. Rendering services to independent clients without informing them about your current employment status but after obtaining written permission from the current employer.

C. Provide free tax assistance to "low-income" people on a volunteer basis, without expecting or accepting any compensation when some of these people can be potential clients of your current employer.

D. None of these answers. C

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Explanations

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A. B. C. D.

Explanation

Standard III (B) prohibits an employee from going into a competitive business while currently employed without obtaining written permission. However, this applies only if the independent practice is for remuneration. Strictly volunteer activities (such as helping low-income people with free financial advice) which cannot be construed as being done for potential compensation do not constitute a violation of the standard even if they result in some loss of business to the current employer. However, the code is not explicit on this point. Obviously, "free tax assistance" to high-income people will never be considered a volunteer activity.

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