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

Standard IV(A) Loyalty for CFA Level II

Updated 7 October 2026 · Fact-checked

Standard IV(A) Loyalty says you must act for the benefit of your employer and must not harm it by depriving it of your skills and abilities. Client interests still come first. To solve a question, identify the duty at stake, check for employer consent, and pick the action that protects clients and discloses openly.

Understand Standard IV(A) Loyalty

Standard IV(A) covers your duty to your employer. In plain words: in matters related to your employment, act for your employer's benefit and do not cause it harm. Do not deprive it of the advantage of your skills and abilities.

Confidentiality of client information is a separate duty under Standard III(E). Keep the two apart: IV(A) is about loyalty and not harming the employer.

Loyalty to the employer is not absolute. The Standard says you must not harm your employer, but the Code puts the interests of clients and the integrity of the market above your own and your employer's. So if your employer asks you to do something unethical or illegal, you must not comply. Duties to clients (Standard III) and the Code override loyalty to the employer.

The Standard also covers what you do outside work. Independent practice means taking on work for compensation or other benefit outside your employer, such as consulting or managing money on the side. If that work is for compensation or other benefit, you need written notice to the employer and its written consent first. This applies whether or not the work competes with your employer. Competing work is the clearest conflict, but non-competing paid work is not exempt. You should give the employer a written description of the services, the expected duration and the compensation. Without consent you risk breaching the Standard. Activity that is unpaid and does not conflict with the employer, such as unpaid teaching of a course, falls outside this requirement, but check your employment terms.

Leaving an employer is a major exam theme. Until your last day you still owe loyalty. You may make plans to start a competing firm or join one, but you must not solicit clients or prospects from your current employer before you leave, and you must not take client records, files or other materials that belong to the employer. After you leave, you may use general skills, knowledge and experience, and contact former clients you can find from public sources or from memory, unless a non-compete or other agreement says otherwise. Your employer owns client lists and records created at work.

The Standard also expects you to follow employer instructions that are lawful and ethical. Whistleblowing is not a duty under the Standard, but it is permitted where it protects clients or the integrity of markets. Reporting violations for those purposes does not breach your loyalty to your employer. This exception does not cover personal disputes or grievances with the employer.

Key formulas to remember

Core duty: Act for the employer's benefit; do not harm it; never above clients or market integrity; Client interests and the Code override employer instructions that are unethical or illegal.
Independent practice rule: Independent practice for compensation or other benefit, competing or not = written notice to the employer and employer's written consent first; Give the employer a written description of services, duration and compensation. Competing work is the clearest conflict, but non-competing paid work still needs consent. Only unpaid activity that does not conflict with the employer is outside the requirement.
Leaving an employer: Before departure: no solicitation, no taking records. After departure: may use general skills and public or remembered contacts; Unless a binding agreement says otherwise.
Ownership of records: Client lists and records created in employment belong to the employer; Copying or removing them without consent breaches the Standard.
Whistleblowing: Permitted, not required: reporting violations to protect clients or market integrity does not breach loyalty; Consider this when an employer's conduct would breach the Code.

How to solve Standard IV(A) Loyalty questions

Use the same sequence for any IV(A) item. It keeps you from choosing the answer that sounds loyal but ignores clients.

1Read the vignette and mark who the employer is, what the analyst is doing and when (before or after leaving).
2Decide whether the activity relates to employment and whether it competes with the employer.
3Check what the employer knows: was written consent given, and was the activity described fully?
4Test for harm: does the action solicit clients, take records, use work time or resources, or deprive the employer of the analyst's services?
5Check for a higher duty: if the employer's instruction is unethical or illegal, clients and the Code come first.
6Choose the answer that names the Standard correctly and gives the compliant action, usually disclose, get written consent, or wait until after leaving.

Quickest way: Three-question filter

When to use it: Use when time is short and the three options are close.

Is it competing or soliciting while still employed? If yes, it is likely a violation unless written consent exists.
Did the person take employer property such as client lists or files? If yes, violation.
Is the employer asking for something unethical? If yes, refusing is correct and not disloyal.

Common mistakes in Standard IV(A) Loyalty

Thinking loyalty to the employer always beats everything else
The word loyalty suggests obeying the firm.
Fix: Remember clients and market integrity rank higher. Refuse unethical instructions.
Believing you can contact clients before resigning if you have not yet left
Candidates treat planning and soliciting as the same.
Fix: You may plan, but you must not solicit clients or prospects of the current employer until you have left.
Assuming verbal consent is enough for independent practice
Informal approval feels adequate in real life.
Fix: The Standard calls for written consent after written notice of the services, duration and compensation.
Thinking paid outside work needs consent only if it competes with the employer
Competing work is the obvious conflict, so candidates assume it is the only trigger.
Fix: Any independent practice for compensation or other benefit needs written notice to, and consent from, the employer, whether or not it competes.
Thinking you can never contact former clients
Confusing duty to the old employer with a permanent ban.
Fix: After leaving you may contact former clients from public sources or memory, unless an agreement prohibits it. You may not use records taken from the employer.
Treating any outside work as a violation
Over-applying the independent practice rule.
Fix: Consent is needed for independent practice for compensation or other benefit, competing or not. Unpaid activity that does not conflict with the employer is generally not a breach, but be alert to conflicts and employment terms.
Calling whistleblowing a breach of loyalty
It looks like harming the employer.
Fix: Acting to protect clients or market integrity is permitted and consistent with the Code. It is not required by IV(A).

Worked examples

Example 1

Vignette: Maria is a portfolio manager at Northgate Asset Management. She plans to start her own advisory firm and, while still employed, emails ten of Northgate's clients inviting them to move to her new firm once she resigns. She also saves the client contact list to her personal drive. Question 1: Which Standard is most clearly violated by the emails? Question 2: Is saving the client list a breach? Question 3: What may Maria do before leaving?

Show the solution

Q1: Soliciting current employer's clients before departure harms the employer, so Standard IV(A) is breached.
Q2: Client lists created during employment belong to the employer. Copying them without consent breaches IV(A).
Q3: Maria may make plans such as arranging office space, registering her firm and preparing materials, as long as she does not solicit clients or use employer property while employed.

Answer: Q1: Standard IV(A). Q2: Yes, a breach. Q3: She may prepare her new business but not solicit clients or take records before leaving.

Example 2

Vignette: Dev is an equity analyst at Alder Securities. He is offered paid work writing research reports for a fund that competes with Alder. He tells his manager orally and starts writing at weekends. Question 1: Does Dev need consent? Question 2: Was his action sufficient? Question 3: What should he do now?

Show the solution

Q1: The work is paid and competes with Alder, so it is independent practice needing employer consent.
Q2: Oral notice is not enough. The Standard calls for written notice of services, duration and compensation, and written consent.
Q3: Dev should stop, give Alder a written description of the work, and resume only once written consent is received.

Answer: Q1: Yes. Q2: No, oral notice is insufficient. Q3: Stop and seek written consent after giving written details.

Exam tips

Look for timing words: before leaving versus after leaving. The same act can be a violation in one period and allowed in the other.
If an option says follow the employer's instruction without question, be suspicious when the instruction is unethical.
Compliant answers usually involve written disclosure and written consent, not oral approval.
Name the Standard exactly. IV(A) is loyalty; do not confuse it with IV(B) additional compensation or III(E) confidentiality.
Check whether the question mentions a non-compete or agreement, as it changes what you may do after leaving.

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 require?

You must act for your employer's benefit in employment matters and not harm it, including by depriving it of your skills and abilities. You must not take its property, such as client records. Client interests and the Code still come first, and confidentiality duties sit under Standard III(E).

Can I do independent work outside my job?

If the work is for compensation or other benefit, you need written notice to your employer and its written consent first. This applies whether or not the work competes with your employer. Give written details of the services, duration and compensation. Unpaid activity that does not conflict with your employer is generally acceptable, subject to your employment terms.

What is the difference between loyalty to employer and loyalty to clients?

Loyalty to the employer means not harming it and supporting its legitimate interests. Loyalty to clients ranks higher, so you must not follow employer instructions that harm clients or break the law or the Code.

How should I handle leaving an employer?

Work normally until your last day. Do not solicit clients or take records beforehand. After leaving, you may use your general skills and contact former clients from public sources or memory, unless an agreement restricts you.