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CFA Level III · Level III Core

Guidance for Standard IV: Duties to Employers

Standard IV sets out what a CFA member or candidate owes an employer: loyalty (IV(A)), additional compensation arrangements (IV(B)), and reasonable supervision of others (IV(C)). You solve cases by finding the duty, checking whether it was breached, and stating the compliant action. Standard VI(A), disclosure of conflicts to employers, is a separate Standard used here only for comparison.

What this chapter covers

This chapter covers the duties you owe the firm you work for. Standard IV(A) says you must act for your employer's benefit and not deprive it of your skills and abilities. It covers things like leaving a job, side work, and using firm resources. Standard IV(B) deals with additional compensation arrangements. You must not 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, unless you obtain written consent from all parties involved. Standard IV(C) puts duties on those who supervise others.

The chapter also includes Disclosure of Conflicts to Employers (Standard VI(A)). It is a different Standard and is not part of Standard IV. It is here only for comparison with IV(B), because both are about telling your employer about something that could affect your independence or your work. Read them together so you can tell them apart in a case.

This chapter is part of Ethical and Professional Standards, a core topic you study whichever pathway you choose. Ethics appears in item sets and essay sets. The skills are the same in both: spot the issue, name the Standard, and say what the person should have done. Ethics also connects to portfolio work, because the same case facts often involve clients, firms and compliance at once.

Ethical and Professional Standards carries 10-15% of the topic weight, and there is no minimum passing score per topic, so every ethics point counts toward the total. Standard IV cases are short and rule-based, so they are some of the easier points to win if you know the exact conditions. They are also easy to lose through loose wording. Since the exam gives no penalty for wrong answers, always answer, but learning the precise duties lets you decide between close options with confidence rather than guessing.

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

  1. 1Standard IV(A) Loyalty to EmployersThis is the base duty. The other topics build on the idea that you must not harm your employer's interests.
  2. 2Standard IV(B) Additional Compensation ArrangementsIt extends loyalty to gifts, benefits, compensation or consideration that could compete or conflict with the employer's interest. You need IV(A) first to see why written consent from all parties involved is required.
  3. 3Disclosure of Conflicts to Employers (Standard VI(A))This is a separate Standard, included only for comparison. Study it after IV(B) so you can separate compensation and benefit issues from wider conflicts.
  4. 4Standard IV(C) Responsibilities of SupervisorsIt is a different type of duty, placed on supervisors, so it is cleaner to study once the employee duties are clear.

How to prepare Guidance for Standard IV: Duties to Employers

Treat this chapter as a set of duties with conditions. Your aim is to match facts to a duty fast and state the compliant action in few words.

  1. Read the text of each Standard in the official curriculum and write its core duty in one sentence of your own.
  2. For each Standard, list the recommended procedures for compliance, such as written consent, disclosure to the employer, and having proper compliance systems.
  3. Build a simple decision check: whose interest is affected, was the employer told, was written consent needed from all parties involved, and who is the supervisor.
  4. Practise with short cases. For each, name the Standard, say violated or not, and give the reason in one or two sentences.
  5. For essay-style answers, answer exactly what the command word asks. If it says identify, name the Standard. If it says justify, give the reason tied to the facts. Do not add extra points.
  6. Do mixed sets that combine IV with other Standards, such as VI(A) or confidentiality, to practise telling them apart.
  7. Review your wrong answers and note whether the error was the wrong Standard or a missed condition.

Common mistakes in Guidance for Standard IV: Duties to Employers

  • Treating loyalty to the employer as above all other duties.

    Fix: Remember that duties to clients and to market integrity rank ahead of loyalty. Act for the employer within those limits. Whistleblowing is consistent with the Code only when its purpose is to protect clients or the integrity of the market, not for personal gain.

  • Assuming verbal approval, or approval from the employer alone, is enough for extra compensation under IV(B).

    Fix: State that written consent from all parties involved (including the employer) is required before accepting gifts, benefits, compensation or consideration that competes or might reasonably conflict with the employer's interest.

  • Confusing IV(B) with VI(A).

    Fix: Use IV(B) when the issue is gifts, benefits, compensation or consideration that competes with, or might reasonably be expected to create a conflict of interest with, the employer's interest. Use VI(A), a separate Standard, for broader conflicts that could impair independence or objectivity.

  • Saying a supervisor is automatically liable, or automatically not liable, because of what a subordinate did.

    Fix: A supervisor is not in breach merely because a subordinate violated, provided adequate procedures existed and reasonable supervision was exercised. Check whether the supervisor had adequate compliance procedures and made reasonable efforts to prevent and detect violations. If not, the supervisor may be in breach of IV(C).

  • Writing a long essay answer with extra points not asked for.

    Fix: Answer the command word. Give the Standard, the verdict and the deciding fact, and stop.

  • Treating preparing to leave a firm as a violation.

    Fix: Preparing is allowed. The breach comes when you use the employer's confidential information or records, or compete while still employed without consent.

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

  • IV(A): act for your employer's benefit and do not harm it. Your duty to clients and the integrity of markets still comes first.
  • Independent practice in competition with your employer needs the employer's consent.
  • Preparing to leave is allowed, but do not take client lists or records belonging to the employer.
  • Whistleblowing is consistent with the Code only when its purpose is to protect clients or the integrity of the market, not for personal gain.
  • IV(B): do not 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, unless you get written consent from all parties involved.
  • IV(C): supervisors must make reasonable efforts to prevent and detect violations by those under their supervision.
  • A supervisor needs adequate compliance procedures, and a written policy alone is not enough if it is not enforced. A supervisor is not in breach merely because a subordinate violated, provided adequate procedures existed and reasonable supervision was exercised.
  • A supervisor who delegates is still responsible for reasonable oversight of those under them.
  • VI(A), a separate Standard shown here for comparison: disclose to your employer matters that could impair your independence and objectivity or interfere with your duties.
  • IV(B) is about gifts, benefits, compensation or consideration that competes or might reasonably conflict with the employer's interest, and needs written consent from all parties involved. VI(A) covers a wider set of conflicts, including ownership and other interests.
  • Read the facts for who was told and when. Disclosure and consent are often the deciding point.
  • In essays, name the Standard, give the verdict, then the fact that decides it.

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 CFA Level III?

It covers duties to employers. IV(A) is loyalty, IV(B) is additional compensation arrangements, and IV(C) is the responsibilities of supervisors. Disclosure of conflicts to employers is a separate Standard, VI(A), and is included in this chapter only for comparison.

Is Standard IV tested in item sets or essays?

Ethics is tested in both formats. Item sets give a vignette with four multiple-choice questions worth 3 points each. Essay sets ask for specific responses, so you must follow the command word.

Can I accept a bonus from a client under Standard IV(B)?

Not without written consent from all parties involved if it competes with, or might reasonably be expected to create a conflict of interest with, your employer's interest. The rule covers gifts, benefits, compensation or consideration. Verbal approval or approval from the employer alone is not enough.

How is IV(C) different from IV(A) and IV(B)?

IV(A) and IV(B) set duties for any member or candidate as an employee. IV(C) places extra duties on people who supervise others, including making reasonable efforts to prevent and detect violations.