Guidance for Standard IV: Duties to Employers: formula sheet

Key formulas

Core duty

Act for the employer's benefit; do not harm the employer or deprive it of your skills, or divulge confidential information

Loyalty applies throughout employment, including the notice period.

Priority rule

Clients and market integrity > employer loyalty

Loyalty never justifies breaking the law or the Code and Standards.

Independent practice

Obtain the employer's written consent before paid outside work that could conflict with the employer's interests; seek it with written notice of the services, compensation and duration

Get written consent before starting. Other outside work depends on employer policy and conflict analysis.

Departing employee

Before leaving: no solicitation, no employer time or resources, no taking records. After leaving: general skill and public information allowed

Client lists and confidential records stay with the employer.

Whistleblowing

Permitted when it protects clients or market integrity, not for personal gain

Comes under the priority rule.

Core duty

Supervisor must make reasonable efforts to detect and prevent violations by anyone subject to their supervision

Judged by the effort made, not by whether a violation happened.

Who is a supervisor

Supervisor = person with authority to direct or influence the behavior of others

Authority and influence decide it, not the job title.

Adequate compliance procedures

Written, clear, relevant to the firm's business, communicated to staff, with monitoring and a response plan for violations

If none exist, decline supervisory duties in writing until adequate ones are adopted.

Delegation

Delegate only to a competent person with real authority; keep reasonable oversight

Responsibility stays with the delegating supervisor.

Response to a violation

Investigate promptly, stop the conduct, increase supervision as needed, document actions

Pair this with enough monitoring to detect similar problems later.

Quick revision

• IV(A): act for your employer's benefit and do not harm it. Your duty to clients and the integrity of markets still comes first.
• Independent practice in competition with your employer needs the employer's consent.
• Preparing to leave is allowed, but do not take client lists or records belonging to the employer.
• Whistleblowing is consistent with the Code only when its purpose is to protect clients or the integrity of the market, not for personal gain.
• IV(B): do not accept gifts, benefits, compensation or consideration that competes with, or might reasonably be expected to create a conflict of interest with, your employer's interest, unless you get written consent from all parties involved.
• IV(C): supervisors must make reasonable efforts to prevent and detect violations by those under their supervision.
• A supervisor needs adequate compliance procedures, and a written policy alone is not enough if it is not enforced. A supervisor is not in breach merely because a subordinate violated, provided adequate procedures existed and reasonable supervision was exercised.
• A supervisor who delegates is still responsible for reasonable oversight of those under them.
• VI(A), a separate Standard shown here for comparison: disclose to your employer matters that could impair your independence and objectivity or interfere with your duties.
• IV(B) is about gifts, benefits, compensation or consideration that competes or might reasonably conflict with the employer's interest, and needs written consent from all parties involved. VI(A) covers a wider set of conflicts, including ownership and other interests.
• Read the facts for who was told and when. Disclosure and consent are often the deciding point.
• In essays, name the Standard, give the verdict, then the fact that decides it.

Common mistakes

• Thinking loyalty ends when you resign. Fix: Loyalty continues through the notice period. Preparing a new firm is fine, but soliciting clients or using resources is not.
• Saying any outside investment work needs consent. Fix: Written consent is needed for paid independent practice that could conflict with the employer's interests. Other outside work depends on the employer's policy and a conflict analysis.
• Assuming a supervisor is automatically in violation whenever a subordinate breaks a rule. Fix: Ask whether the supervisor made reasonable efforts. Adequate procedures and monitoring can mean no IV(C) violation.
• Thinking delegation removes the supervisor's responsibility. Fix: The supervisor stays responsible. Check the delegate's competence and keep reasonable oversight.

Exam tips

• Watch the timeline words: before leaving, after leaving, notice period, now independent.
• Look for the words written and consent; the Standard asks for written consent before paid outside work that could conflict with the employer's interests.
• When a vignette mentions client lists or files, treat them as employer property.
• If an employer instructs something illegal, choose the answer that protects clients and the law.
• In essays, name the Standard, say violated or not, and give a one-line reason to earn the points.
• Read for the supervisor's actions, not just the subordinate's breach. The answer usually turns on procedures and response.
• In essay sets, name the Standard, state the failure or compliance in one sentence, then give the corrective actions asked for, matching the command word.
• Look for red flags that the supervisor ignored. Ignoring them is the most common IV(C) violation in cases.