Level III Core · Code of Ethics and Standards of Professional Conduct

CFA Standard IV: Duties to Employers Explained

Updated 8 October 2026 · Fact-checked

Standard IV sets three duties. IV(A): act for your employer's benefit and do not harm it, including when you leave. IV(B): get written consent before accepting compensation that could conflict with your employer's interests. IV(C): supervisors must take reasonable steps to prevent and detect violations. Solve cases by finding the duty, then the failure.

Understand Duties to Employers (Standard IV)

Standard IV covers your duties to the people who employ you. It has three parts: loyalty (IV(A)), additional compensation arrangements (IV(B)) and responsibilities of supervisors (IV(C)).

Loyalty (IV(A)) means you do not put your own interests ahead of your employer's. You must not harm the employer. Client interests still come first. If a duty to your employer would force you to break the law or the Code and Standards, the law and the Code and Standards win. Independent practice that competes with your employer needs the employer's consent. Preparing to leave is allowed, but you cannot take client lists, records or files that belong to your employer, and you cannot solicit clients before you leave. Using your own general skill, knowledge and memory of clients' names is different from taking written records.

Additional compensation (IV(B)) covers gifts, bonuses or payments from clients, third parties or others that could compete with, or create a conflict with, your employer's interests. You must get written consent from all parties involved, including your employer, before you accept. Your employer then knows about the arrangement and can judge the conflict.

Supervisors (IV(C)) 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. A supervisor needs a compliance system that is adequate, not merely present. If a supervisor delegates tasks, the supervisor remains responsible. When a violation is found, the supervisor must act quickly: stop it, investigate, and report as the employer's procedures require.

In a Level III case, link the facts to the duty and the client. Ask who is harmed, whether consent was written, and whether the person had authority over the violator.

Key rules to remember

Standard IV(A) Loyalty: Do not harm the employer; act for its benefit; client interests and the law and the Code and Standards come first; Preparing to compete is allowed. Using employer property or soliciting clients before leaving is not.
Standard IV(B) Additional Compensation: Get written consent from all parties involved before accepting compensation that may conflict with employer interests; Disclosure alone is not enough. Consent should be in writing.
Standard IV(C) Supervisors: Make reasonable efforts to detect and prevent violations by people under your supervision or authority; Requires adequate compliance procedures, a prompt response to violations, and ongoing monitoring. Delegating does not remove responsibility.
Leaving an employer: Allowed: own skills, general knowledge, memory of contacts, and preparing a new firm. Not allowed: employer records, client lists, and soliciting before departure; Check whether the information was created by the employer or is in your own head, and whether solicitation happened before the exit.

How to solve Duties to Employers (Standard IV) questions

Use this method for any Standard IV item set or essay.

1Read the facts and identify who is employee, employer, supervisor and client.
2Decide which part applies: IV(A) loyalty, IV(B) extra compensation, or IV(C) supervision.
3For IV(A), check the timing: is the person still employed or already gone, and was any employer property or client solicitation involved?
4For IV(B), check whether the payment could create a conflict with the employer and whether written consent was obtained from all parties involved, including the employer.
5For IV(C), check whether the person had authority over the violator, whether reasonable procedures existed, and whether the supervisor acted promptly.
6State whether there is a violation, then give the specific action that complies.
7Check that client interests and the law were not overridden by employer duties. Then match the command word, such as identify, justify or recommend.

Quickest way: Three-question Standard IV scan

When to use it: Use in item sets when you have about two minutes per question and the vignette is long.

Ask: is someone leaving? If yes, it is IV(A): only own skill and memory are allowed, with no employer records and no solicitation before exit.
Ask: is someone receiving money or benefits from a client or third party? If yes, it is IV(B): was there written consent from all parties involved, including the employer?
Ask: did someone fail to stop a subordinate's violation? If yes, it is IV(C): were reasonable procedures and a prompt response in place?
Pick the option that adds written consent, adequate procedures or protects the employer without harming clients.

Common mistakes in Duties to Employers (Standard IV)

Treating any job search or planning to leave as a violation of loyalty.
Students read loyalty as never doing anything that benefits yourself.
Fix: Preparing to leave is allowed. Violations come from using employer property or soliciting clients while still employed.
Saying oral approval satisfies IV(B).
Students focus on disclosure and forget the written requirement.
Fix: Look for written consent from all parties involved. Oral approval or silence is not enough.
Putting employer interests above clients.
The standard is titled Duties to Employers, so students assume it is the top priority.
Fix: Client interests, the law and the Code and Standards come first. An employer instruction cannot justify a violation.
Thinking a supervisor is protected simply because a compliance policy exists.
Students stop at the presence of a policy.
Fix: The procedures must be adequate and the supervisor must monitor them and respond promptly to violations.
Assuming a supervisor who delegates is no longer responsible.
Students think the delegate carries the duty.
Fix: Delegation does not remove responsibility. The supervisor must still take reasonable steps to check the work.
Confusing client names remembered with client records taken.
Both involve client information.
Fix: Memory and general skill belong to the employee. Written lists, files and records created for the employer do not.

Worked examples

Example 1

A portfolio manager has resigned from her firm. Her last day is in four weeks. During the notice period she copies the firm's client contact list onto a personal drive and emails several clients about her new firm. Which Standard is violated and why?

Show the solution

Identify the setting: she is still employed, so IV(A) loyalty applies.
Copying the list takes employer property. The list was created by the firm for its business.
Emailing clients about her new firm is solicitation before departure, which harms the employer.
Preparing to leave was permitted, but these two actions went beyond preparation.
Remedy: she must return the copied list to the firm and disclose what she took. Deleting the copy without telling the firm is not adequate. She must also stop soliciting clients.

Answer: She violated Standard IV(A). She should return the copied list to the firm, disclose what was taken, and stop soliciting clients. Only after she leaves may she contact clients, using her own memory and public information, without using any firm records.

Example 2

An analyst at an asset manager is offered a performance bonus by a client of the firm that would be linked to the returns of the client's account, on top of the firm's fee. The analyst has not told his employer. What must he do under the Standards?

Show the solution

Identify the issue: payment from a client outside the employer's fee arrangement, so IV(B) applies.
Ask if it could create a conflict: a bonus tied to one account gives him a personal incentive that may conflict with his employer's interests.
The same incentive could also conflict with his duties to the firm's other clients, so Standards III(A) and III(B) are worth keeping in mind. The facts do not show any actual unfair treatment of other clients.
Required action: disclose the offer to his employer and obtain written consent from his employer and any other parties involved before accepting.
If consent is refused, decline the bonus.

Answer: He must disclose the offer and get written consent from his employer (and any other parties involved) before accepting the bonus. Without it, accepting would violate Standard IV(B). The bonus could also create a conflict with duties to other clients under Standards III(A) and III(B), which is another reason to disclose it.

Exam tips

Look for the words written, before, and reasonable. They usually decide which option is correct.
In leaving-employer cases, separate what is in your head from what is in the firm's files.
For supervisor questions, the best answer usually adds adequate procedures plus prompt action, not just a warning.
In essay sets, name the Standard, state the violation in one sentence, then give the corrective action. Match the number of responses asked for.
When a choice puts employer interest above clients or the law, reject it.

Duties to Employers (Standard IV) in other exams

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

Duties to Employers (Standard IV): frequently asked questions

Can I start a competing business while still employed?

Not without the employer's consent. You may make preparations that do not harm the employer, but soliciting clients or using employer resources breaches Standard IV(A).

Is written consent really needed for additional compensation?

Yes. Standard IV(B) requires written consent from all parties involved before you accept compensation that could conflict with your employer's interests.

Who counts as a supervisor under IV(C)?

Anyone with supervisory authority over the person who committed the violation. Responsibility depends on authority, not just job title.

Does loyalty to my employer override my duty to clients?

No. Client interests, the law and the Code and Standards come first. Your duty to the employer cannot require you to break them.