CFA Level I Exam · Code of Ethics and Standards of Professional Conduct

CFA Standard IV: Duties to Employers Explained

Updated 7 October 2026

Standard IV covers what you owe your employer. IV(A) Loyalty: act for your employer's benefit and do not harm it. IV(B) Additional Compensation Arrangements: get written consent before accepting outside pay that may conflict. IV(C) Responsibilities of Supervisors: make reasonable efforts to detect and prevent violations by people you supervise.

Understand Duties to Employers: Standards IV(A) to IV(C)

Standard IV deals with your relationship with your employer. It has three parts: loyalty, extra compensation from other sources, and the duty to detect and prevent violations by people you supervise. The idea behind all three is that your employer should be able to trust you.

Standard IV(A) Loyalty. The official wording is: "In matters related to their employment, Members and Candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information, or otherwise cause harm to their employer." Loyalty is owed in matters related to employment. Your private life is your own. But while you are still employed you cannot take client lists or records, solicit your employer's clients, or use your employer's time, property or resources to prepare to compete. Once you have left, you may compete, but only with your own skills and memory, not with employer property.

Independent practice that could result in compensation or other benefit in competition with your employer requires written consent from your employer. Giving written notice of the services, the expected duration and the compensation is the sound way to seek that consent. Whistleblowing is an exception to the duty not to divulge confidential information, but it is not the only one. Disclosure is also permitted where required by law or where the information concerns illegal activity. If you act to protect clients or the integrity of the capital markets, with no personal gain, that action is not a breach of loyalty. Outside these cases, the duty to your employer still applies.

Standard IV(B) Additional Compensation Arrangements. The wording is: "Members and Candidates must not accept gifts, benefits, compensation, or consideration that competes with, or might reasonably be expected to create a conflict of interest with, their employer's interest unless they obtain written consent from all parties involved." The key tests are: could it compete or conflict, and do you have written consent from all parties? Verbal consent is not enough. Typical cases are outside compensation or gifts from clients or third parties that your employer does not know about. Referral fees are a different matter: they are disclosed to the employer and clients under Standard VI(C).

Standard IV(C) Responsibilities of Supervisors. The wording is: "Members and Candidates must make reasonable efforts to detect and prevent violations of applicable laws, rules, regulations, and the Code and Standards by anyone subject to their supervision or authority." A supervisor must understand what the standard requires, put compliance procedures in place, and make sure they are adequate. If a supervisor finds a violation, they must act promptly: investigate, stop it, and escalate. Delegating a task does not delegate the responsibility. If no adequate compliance system exists, a supervisor should decline supervisory responsibility in writing until one is in place.

Key formulas to remember

Standard IV(A) Loyalty: Act for employer's benefit in employment matters: do not deprive the employer of your skills, divulge confidential information, or cause harm; Do not take employer property, solicit employer clients or use employer time or resources to prepare to compete before leaving. Whistleblowing is allowed only to protect clients or market integrity, with no personal gain.
Standard IV(B) Additional Compensation Arrangements: Outside pay that competes or may create a conflict → written consent from all parties; Written, and from all parties involved. Verbal approval fails.
Standard IV(C) Responsibilities of Supervisors: Reasonable efforts to detect and prevent violations by people under your supervision or authority; Needs adequate compliance procedures and prompt action on violations; delegation does not remove responsibility.
Leaving an employer: Skills and general knowledge: yours. Client records, lists, files: employer's; Competing after leaving is fine if you use no employer property. Before leaving, do not solicit employer clients or use employer time, property or resources to prepare to compete.

How to solve Duties to Employers: Standards IV(A) to IV(C) questions

Use this sequence for any Standard IV question. It helps you eliminate two of the three options quickly.

1Identify which part applies: loyalty (leaving, competing, confidential information), compensation (outside pay or gifts), or supervision (someone else's violation).
2Check timing: is the act before or after employment ended? Preparing to leave is allowed; using employer property or soliciting during employment is not.
3For loyalty, ask whether the matter relates to employment and whether the action harms the employer. Remember that protecting clients or market integrity overrides employer loyalty.
4For compensation, ask whether the benefit could compete or conflict with the employer's interest. If yes, look for written consent from all parties.
5For supervision, ask whether the supervisor had adequate compliance procedures and acted promptly after learning of the issue.
6Pick the option that matches the Standard's exact wording, and reject options that rely on verbal consent, delegation as an excuse, or doing nothing.

Quickest way: Three-question shortcut for Standard IV

When to use it: Use it when you have about 90 seconds and the stem mentions an employer, a side job, a bonus or a manager.

Who is acting: an employee (IV(A) or IV(B)) or a supervisor (IV(C))?
Is the benefit or activity outside the employer's knowledge? If yes, the fix is usually written disclosure and consent.
Is there a risk to clients or markets? If yes, client protection comes before employer loyalty.
Eliminate any option that says verbal approval, ignoring the problem, or relying on someone else's compliance work.

Common mistakes in Duties to Employers: Standards IV(A) to IV(C)

Thinking verbal consent satisfies Standard IV(B) or independent practice rules.
In real life a manager's nod feels like approval.
Fix: The Standard requires written consent from all parties involved. Verbal approval is never enough.
Believing you cannot compete with your former employer at all.
Students mix up loyalty during employment with duties after it ends.
Fix: After leaving, you may compete using your own skills and memory. You may not take client lists, records or other employer property.
Treating whistleblowing as a breach of loyalty.
The word loyalty suggests always siding with the employer.
Fix: Acting to protect clients or market integrity is not a violation of IV(A). Those interests rank above the employer's.
Assuming a supervisor is safe if they delegated the task.
Delegation seems to move responsibility to the staff member.
Fix: Under IV(C) the supervisor remains responsible. They must still make reasonable efforts, set up adequate procedures and respond promptly to violations.
Applying IV(A) to purely private activities.
Students read loyalty as covering all of your life.
Fix: The wording says matters related to employment. Unrelated personal activities are outside it, unless they harm the employer through the job.
Thinking IV(B) only covers cash.
The title mentions compensation.
Fix: The wording covers gifts, benefits, compensation or consideration. Any of these that could conflict need written consent.

Worked examples

Example 1

Maria is a portfolio manager at an asset management firm in London. She has accepted a new job at a competitor starting in two months and has not yet resigned. During her notice planning she copies the client contact list onto a personal drive so she can call clients after she leaves. According to the CFA Standards, Maria most likely violated:
A. no Standard, because she has not yet left the firm.
B. Standard IV(A) Loyalty.
C. Standard IV(B) Additional Compensation Arrangements.

Show the solution

Identify the Standard: this is about leaving an employer and employer property, which is IV(A).
The client list is employer property. Copying it while still employed deprives the employer of its advantage and uses confidential information.
Option A is wrong because the duty applies during employment, and the harm occurs now.
Option C is wrong because no outside compensation arrangement is described.

Answer: B. Maria violated Standard IV(A) because she took employer records for use after leaving. She may compete later using her own skills and memory, but not employer property.

Example 2

David is head of equity research at a bank in Frankfurt. He learns that an analyst in his team has been sharing draft recommendations with a favoured client before release. The bank has a compliance manual, but David is busy and asks the analyst to sign a note promising not to repeat it. According to the Standards, David most likely:
A. complied with Standard IV(C), because the analyst gave a written promise.
B. violated Standard IV(C), because he did not act promptly to investigate and stop the violation.
C. complied with Standard IV(C), because the bank has a compliance manual.

Show the solution

Identify the Standard: a supervisor facing a subordinate's violation, so IV(C).
The Standard requires reasonable efforts to prevent and detect violations, and prompt action once one is found.
A promise from the analyst is not a reasonable effort to investigate or correct the matter. It does not show that the practice has stopped or that the scope is known.
Having a manual helps, but it does not replace acting on a known violation. This rules out C.

Answer: B. David did not act promptly to investigate and stop the violation. A supervisor must follow up, stop the conduct and escalate where needed.

Exam tips

Match the stem to the right sub-standard first: leaving or competing is IV(A), outside pay is IV(B), a manager and a team is IV(C).
Look for the words written and all parties in IV(B) questions. Options with verbal or partial consent are usually the wrong ones.
In IV(A) questions about leaving a firm, separate what you take (client lists, files: not allowed) from what you know (skills, memory: allowed).
With three options and no penalty for wrong answers, always answer. Eliminate the option that ignores a violation or relies on delegation, then choose between the other two.
In IV(C) questions, the right answer usually combines adequate procedures with prompt action. Passive options are typically wrong.

Practice questions from Code of Ethics and Standards of Professional Conduct

Duties to Employers: Standards IV(A) to IV(C): frequently asked questions

What does Standard IV(A) Loyalty require when I leave an employer?

You must not take client records, lists or other employer property. While still employed, you must not solicit your employer's clients or use employer time, property or resources to prepare to compete. After you have left, you may compete using your own skills, memory and general knowledge.

When do I need written consent under Standard IV(B)?

You need written consent from all parties involved when you 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. Verbal consent is not enough.

What are the responsibilities of supervisors under Standard IV(C)?

Supervisors must make reasonable efforts to detect and prevent violations of laws, rules, regulations and the Code and Standards by anyone under their supervision or authority. This means having adequate compliance procedures and acting promptly when a violation is found. Delegating a task does not remove the supervisor's responsibility.

Is whistleblowing a violation of Standard IV(A)?

Not when the action is taken to protect clients or the integrity of the capital markets, with no personal gain. If the purpose is anything else, the duty not to divulge confidential information or harm the employer still applies.