Skip to content

CFA Level I · CFA Level I Exam

Guidance for Standard IV: Duties to Employers

Standard IV covers what you owe your employer: loyalty (IV(A)), disclosure of additional compensation arrangements (IV(B)) and responsibility of supervisors (IV(C)). Solve questions by finding who owes what to whom, checking whether written consent or disclosure was given, and choosing the action that protects clients and the employer.

What this chapter covers

This chapter covers the Code of Ethics and Standards of Professional Conduct on duties to employers. Standard IV(A) Loyalty says you must act for the benefit of your employer and not deprive it of the advantage of your skills and abilities, divulge confidential information, or otherwise cause harm to it. Standard IV(B) Additional Compensation Arrangements says you must not accept gifts, benefits, compensation or consideration from a source other than your employer that competes with, or might reasonably be expected to create a conflict of interest with, your employer's interests, unless you obtain written consent from all parties involved. The written disclosure to the employer should describe the nature and terms of the arrangement, such as the compensation and its duration. Standard IV(C) Responsibilities of Supervisors says you must make reasonable efforts to ensure that anyone subject to your supervision complies with laws, rules, regulations and the Code and Standards.

The chapter also links to Standard VI(A) Disclosure of Conflicts. That standard asks you to make full and fair disclosure of all matters that could reasonably be expected to impair your independence and objectivity or interfere with your duties to your employer, clients and prospective clients. Disclosure must be prominent, plain and communicated in a way that clients and employers can understand.

This chapter connects to the rest of the Ethical and Professional Standards topic. Loyalty to the employer must not be exercised in a way that harms clients or the integrity of capital markets. Supervisor duties link to Standard I(A) on knowledge of the law and to compliance procedures. Disclosure links to Standards III (duties to clients) and V (investment analysis). Every question has three options (A, B, C), so you must spot the single best action quickly.

Ethical and Professional Standards carries one of the largest topic weights on the Level I exam, 10-15% under the 2027 curriculum, and the questions are usually short and rule-based. Standard IV questions are very winnable once you know the wording of each Standard and the typical fact patterns, such as leaving an employer, side work, bonuses and weak supervision. There is no penalty for wrong answers, but a clear method lets you remove two options fast and save time for calculation topics.

Guidance for Standard IV: Duties to Employers: topics in the order to study them

  1. 1Standard IV(A) LoyaltyStart here because it sets the core idea: duty to the employer, limited by duties to clients and market integrity, and it covers leaving employment, independent practice and whistleblowing.
  2. 2Standard IV(B) Additional Compensation ArrangementsIt builds on loyalty by asking when pay or benefits from a source other than your employer create a conflict, and its key test is written consent from all parties involved.
  3. 3Standard IV(C) Responsibilities of SupervisorsStudy it third because it shifts from your own conduct to the conduct of those you supervise, and it relies on the idea of reasonable procedures and compliance systems.
  4. 4Conflicts and Disclosure to Employers (Standard VI(A))Finish with disclosure, which pulls the chapter together: many IV(A) and IV(B) cases are solved by disclosing the conflict to the employer.

How to prepare Guidance for Standard IV: Duties to Employers

Treat this chapter as a set of rules plus a few repeating fact patterns. Learn the exact wording first, then practise applying it to short cases.

  1. Read each Standard in the official text and write its key duty in one sentence in your own words.
  2. For each Standard, list its typical triggers: leaving a firm, outside business, referral fees, bonuses tied to results, weak compliance, and gifts or relationships that impair independence.
  3. Learn the compliance recommendations in the guidance, for example written consent for outside compensation and a clear compliance system for supervisors.
  4. Practise cases by asking three questions: who is the employer or client, what duty applies, and what action satisfies the Standard and protects clients.
  5. Do timed sets of three-option questions at about 90 seconds each. After each, say why the two wrong options violate a named Standard.
  6. Review every error in a log, naming the Standard and the word in the case that you missed, such as written, reasonable or prominent.

Common mistakes in Guidance for Standard IV: Duties to Employers

  • Assuming loyalty to the employer always comes first.

    Fix: Remember that loyalty to the employer must not be exercised in a way that harms clients or the integrity of capital markets. Loyalty is limited by those duties.

  • Treating oral approval as enough for outside compensation or competing outside work.

    Fix: Look for the word written in IV(B) and in the guidance on independent practice that may compete or conflict. If consent is not written, the answer is usually a violation.

  • Thinking you cannot plan to leave an employer at all.

    Fix: Preparing to compete, such as setting up a business or looking for a job, is fine if you do not use employer time, property, client lists or records, and do not solicit clients while employed.

  • Believing a supervisor is safe if they delegate or if no violation has been proved.

    Fix: IV(C) requires reasonable efforts to prevent and detect violations, so delegating does not remove responsibility. Look for adequate procedures, training and prompt action.

  • Confusing disclosure with approval.

    Fix: Disclosure under VI(A) must be full and clear, but some conflicts also need consent, as in IV(B), or must be avoided if they impair objectivity.

  • Choosing an answer because it sounds dramatic, such as reporting to regulators immediately, when firm policy calls for internal escalation first.

    Fix: Follow firm policy and escalate internally and through compliance first. If internal channels fail or the violation threatens clients or market integrity, going outside the firm can be justified. Choose the action that fits the facts.

Last-day revision: Guidance for Standard IV: Duties to Employers

  • IV(A): act for your employer's benefit and do not cause it harm, but never in a way that harms client interests or market integrity.
  • IV(A): you may prepare to compete before leaving, but you must not take client lists or records, or solicit clients while still employed.
  • IV(A): before independent practice or outside work that may compete with your employer or create a conflict, give the employer written notice and obtain its consent.
  • IV(A): follow your firm's policies and escalate violations internally first; whistleblowing outside the firm can be justified when it protects clients or market integrity.
  • IV(B): you must not accept compensation or benefits from a source other than your employer that might create a conflict of interest with your employer's interests unless you get written consent from all parties involved.
  • IV(B): the written disclosure to the employer should describe the nature and terms of the arrangement, such as the compensation and its duration.
  • IV(C): supervisors must make reasonable efforts to prevent and detect violations by those under their supervision.
  • IV(C): adopt compliance procedures and ensure they are communicated and enforced; a supervisor who delegates is still responsible.
  • IV(C): if you find a violation, act promptly and investigate rather than ignore it.
  • VI(A): disclose conflicts that could impair independence and objectivity or interfere with duties, and make the disclosure prominent and plain.
  • If the wording says written consent or full disclosure, check the case for it. Missing consent usually points to a violation.
  • Pick the answer that satisfies the Standard and protects clients, not the one that is merely legal or profitable.

Guidance for Standard IV: Duties to Employers practice questions

Guidance for Standard IV: Duties to Employers in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Guidance for Standard IV: Duties to Employers: frequently asked questions

What does Standard IV cover in the CFA Level I exam?

It covers three duties to employers: IV(A) Loyalty, IV(B) Additional Compensation Arrangements and IV(C) Responsibilities of Supervisors. Standard VI(A) on disclosure of conflicts also applies in many employer cases. All are tested through short case-based questions.

Can I start a competing business while still employed?

You may make preparations, such as planning the business or registering a name, if you do not use employer resources, client lists or records, and do not solicit the employer's clients before you leave. Actually competing while employed, or doing outside work that may compete with your employer or create a conflict, needs written notice to the employer and its consent.

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

You need it when you would receive compensation or benefits from a source other than your employer that might create a conflict of interest with your employer's interests. IV(B) requires written consent from all parties involved. Your written disclosure to the employer should describe the nature and terms of the arrangement, such as the compensation and its duration.

How do I answer supervisor questions under IV(C)?

Check whether the supervisor made reasonable efforts to prevent and detect violations. Look for compliance procedures, training, monitoring and a prompt response to any problem. The best answer is usually the one where the supervisor acts promptly and investigates rather than ignoring the problem, but always check it against the facts given.