CFA Level I Exam · Guidance for Standard IV: Duties to Employers

CFA Level I Standard IV(A) Loyalty Explained

Updated 7 October 2026 · Fact-checked

Standard IV(A) says members and candidates must act for the benefit of their employer and not deprive it of their skills and abilities, divulge confidential information, or harm the employer. To solve questions, ask whether the person put the employer's interests ahead of their own gain, and whether a higher duty applies, such as protecting clients or market integrity.

Understand Standard IV(A) Loyalty

Standard IV(A) deals with your duty to your employer. The official text says: "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."

The key phrase is "in matters related to their employment". The standard covers what you do in your job. It does not give your employer control over your whole life. You can have outside interests. But you must not use your work, your employer's time, resources or clients, or confidential information to benefit yourself at the employer's expense.

Loyalty to the employer is not absolute. Your duties to clients, the integrity of capital markets, and the law and the Code and Standards limit what loyalty can require. If an employer instruction would violate the law or the Code and Standards, you must not follow it. That duty comes from Standard I(A) and the Code, not from IV(A). IV(A) loyalty is limited by those duties.

The standard covers four areas the exam tests again and again:

Independent practice: Before you undertake independent practice that could result in compensation or other benefit in competition with your employer, you need the employer's written consent. For any outside activity, do not use the employer's time, clients or resources.
Leaving an employer: You may make plans to leave and may compete after you go, unless a valid agreement says otherwise. But you must not take client lists, records or files, and you must not solicit clients or prospects while still employed.
Use of confidential information: What you learned at work remains the employer's. Do not use it for yourself or a new employer.
Whistleblowing: The Handbook says that, in some cases, a member may violate confidentiality, if the purpose is to protect clients or the integrity of the market, and not for personal gain. This is an exception to loyalty, not a breach of it.

Employers should have a code of ethics and compliance policies, and you should follow them where they are lawful and consistent with the Code and Standards. If you are asked to take part in activity that would violate the law or the Code and Standards, you should not follow the instruction. Under Standard I(A) Knowledge of the Law, you should dissociate from the activity.

Key formulas to remember

Core duty (IV(A)): Act for the employer's benefit in employment matters; do not deprive it of your skills, divulge confidential information, or cause it harm; Applies to matters related to employment. It is not a duty to give up all outside activity.
Independent practice: Independent practice that could result in compensation or other benefit in competition with the employer needs prior written consent; The Standard requires written consent for competing independent practice. For any outside activity, never use the employer's time, clients or resources.
Leaving an employer: Plan and prepare to leave: allowed. Take client lists or records, or solicit while employed: not allowed; After leaving you may compete, unless a valid non-compete agreement applies. Do not use confidential information.
Whistleblowing exception: Violating confidentiality may be appropriate to protect clients or market integrity, not for personal gain; Employer loyalty does not override duties to clients and markets.
Nature of employment: An employee generally owes a fuller duty of loyalty. For an independent contractor, the agreement shapes the degree of obligation, but duties to clients and the Code and Standards still apply.; The nature of the relationship affects the degree of loyalty owed, but never removes duties to clients or the Code and Standards.

How to solve Standard IV(A) Loyalty questions

Use this method for any IV(A) question. Most questions turn on whether the action happened before or after leaving, and whether the employer knew.

1Identify who did what, and whether the person is still employed at the time of the action.
2Decide whether the action relates to employment or is a purely private matter.
3Check for competition: does the action compete with the employer or use its time, clients, records or resources?
4Check for consent: did the employer give prior written approval (independent practice) or is there a valid agreement?
5If the person is leaving, separate allowed preparation from prohibited acts such as soliciting clients or taking files while employed.
6Check for confidential information used for personal gain or for a new employer.
7Ask whether a higher duty applies, such as protecting clients or market integrity (whistleblowing) or refusing an illegal instruction.
8Pick the option that matches the Standard's wording and eliminate the two others.

Quickest way: Three-test shortcut for IV(A)

When to use it: Use when you have about 90 seconds and the stem describes a member changing jobs, taking side work or reporting wrongdoing.

Timing test: Still employed or already left? Soliciting, copying files or competing while employed is a violation.
Property test: Is the item the employer's (client lists, records, confidential data)? Taking it is a violation, even if you created it at work.
Purpose test: Is disclosure to protect clients or markets (acceptable) or for personal gain (violation)?
Remove any option that breaks a test. Of the two remaining, prefer the one with written consent or proper disclosure.

Common mistakes in Standard IV(A) Loyalty

Thinking that a member who plans to leave is violating loyalty
Students read any preparation for a new job as disloyal.
Fix: Preparing to leave, such as setting up a new firm, is allowed. Soliciting clients or taking records while still employed is not.
Believing a non-compete agreement is required to prevent client solicitation before leaving
Students confuse duties after departure with duties while employed.
Fix: While employed, the duty of loyalty applies even without an agreement. After leaving, the agreement matters.
Assuming client lists you built yourself are yours to take
You feel personal ownership of relationships you developed.
Fix: Client records created at work on the employer's behalf belong to the employer, so do not copy or take them. After you leave, you may contact former clients using general knowledge of their names and contact details, as long as you use no employer records and no non-compete or other valid agreement forbids it. While you are still employed, soliciting clients for a competing business is a violation.
Treating whistleblowing as always a breach of loyalty or confidentiality
Students remember only the duty not to divulge confidential information.
Fix: Disclosure to protect clients or market integrity, and not for personal gain, can be appropriate. Personal gain makes it a violation.
Following an employer's instruction that would violate the law or the Code and Standards
Loyalty is read as obedience.
Fix: A member should not follow an instruction that would violate the law or the Code and Standards. Under Standard I(A), the member should dissociate from the activity. IV(A) loyalty is limited by these duties and by duties to clients and markets.
Thinking all outside work needs approval
Students over-apply the independent practice rule.
Fix: Written consent is needed before independent practice that could result in compensation or other benefit in competition with the employer. Do not use the employer's time, clients or resources for any outside activity.

Worked examples

Example 1

Anna, a portfolio manager at Firm X, plans to start her own advisory firm. While still employed, she emails three clients from her work account to say she will soon offer them lower fees, and she copies the client contact list to a personal drive. Has Anna violated Standard IV(A)? A) No, because she is allowed to plan to leave. B) Yes, because she solicited clients and took the client list while employed. C) Yes, but only because she used a work email account.

Show the solution

Anna is still employed, so her duty of loyalty is in force.
Planning to start a firm is allowed.
Soliciting the employer's clients while employed harms the employer.
Copying the client list takes employer property.
Option A ignores the solicitation and copying. Option C names a minor point and misses the core violations.

Answer: B. Anna violated IV(A) by soliciting clients and taking the client list while still employed.

Example 2

Ben, an analyst, discovers that his firm is misleading clients about the risk of a product, and his supervisor tells him to ignore it. After raising it internally without result, he reports it to the appropriate regulator. He gains no personal benefit. Has Ben violated IV(A)? A) Yes, because he broke confidentiality. B) No, because disclosure to protect clients and market integrity, without personal gain, is acceptable. C) Yes, because he should have obeyed his supervisor.

Show the solution

Loyalty to the employer does not override duties to clients and markets.
Ben's purpose is protecting clients and market integrity.
He has no personal gain.
Option A treats confidentiality as absolute. Option C treats loyalty as obedience.

Answer: B. Ben's whistleblowing is acceptable under the Handbook's guidance because it protects clients and the market and he does not act for personal gain.

Exam tips

Look for timing words such as "while still employed" and "after leaving". They usually decide the answer.
Items that mention client lists, files or records copied before departure are usually violations.
When whistleblowing appears, check the motive. Protecting clients or markets is fine. Personal gain is not.
Do not choose options that treat the employer's instruction as the final authority. The Code and Standards come first.
With no penalty for wrong answers, always answer. Eliminate the option that breaks a clear rule, then choose between the other two.

Practice questions from Guidance for Standard IV: Duties to Employers

Standard IV(A) Loyalty in other exams

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

Standard IV(A) Loyalty: frequently asked questions

What does Standard IV(A) Loyalty say?

It says that in matters related to their employment, members and candidates must act for the benefit of their employer and not deprive it of their skills and abilities, divulge confidential information, or otherwise cause harm to the employer.

What can I do when leaving an employer under the CFA Standards?

You can prepare to leave, such as arranging a new job or setting up a firm, and you may compete after leaving unless a valid agreement forbids it. You must not solicit clients or take client lists and records while still employed, and you must not use confidential information.

Is whistleblowing a violation of Standard IV(A)?

Not necessarily. The Handbook says disclosing confidential information to protect clients or the integrity of the market can be appropriate, as long as it is not for personal gain. Loyalty to the employer does not override those duties.

Do I need my employer's permission for independent practice?

You need prior written consent before independent practice that could result in compensation or other benefit in competition with your employer. For any outside activity, you should not use the employer's time, clients or resources.