Skip to content

Level III Core · Guidance for Standard IV: Duties to Employers

Standard IV(A) Loyalty to Employers Explained

Updated 8 October 2026 · Fact-checked

Standard IV(A) requires members and candidates to act for their employer's benefit and not deprive it of their skills and abilities, divulge confidential information, or harm it. Solve questions by finding the duty owed, what was taken or disclosed, and whether the employer consented or the law or integrity of markets overrides loyalty.

Understand Standard IV(A) Loyalty to Employers

Standard IV(A) says you must act for the benefit of your employer and not harm it. You must not deprive your employer of your skills and abilities, divulge confidential information, or do anything that would injure the firm's business. Loyalty is owed to the employer, but it is not absolute.

The Standard also balances this duty. Loyalty to your employer does not override your duty to clients, your obligation to protect the integrity of capital markets, or the law. Duty to clients comes first. If an employer asks you to break the law or the Code and Standards, you must not follow it.

Independent practice is a common test. If you want to do investment work outside your job for compensation that could conflict with your employer's interests, you should obtain your employer's written consent before you start. You seek that consent by giving written notice that describes the services, the expected compensation and the duration. Unpaid work for friends or charities is a different case, but check your employer's policy and any conflict.

Leaving an employer is allowed. Until your last day you still owe loyalty. You may make plans to compete, but you must not use employer time or resources for them, and you must not solicit clients or prospects of your employer before you leave. You must not take client lists, records or other documents that belong to the employer. After you leave, you may use your general skill and knowledge and information that is publicly available or that you remember in a non-confidential way, unless a valid agreement says otherwise. Client-specific confidential information stays protected.

Nature of employment matters. An employee has a strong duty of loyalty and is bound by the employer's rules. An independent contractor has a more limited relationship and a wider freedom to act for others, but the duty is set by the agreement. In both cases, apply the Standard to the facts. Whistleblowing is also covered. You may report an employer's illegal or unethical activity when it is needed to protect clients or the integrity of markets, and this does not breach loyalty. Reporting for personal gain does not qualify.

Key rules to remember

Core duty
Act for the employer's benefit; do not harm the employer or deprive it of your skills, or divulge confidential information
Loyalty applies throughout employment, including the notice period.
Priority rule
Clients and market integrity > employer loyalty
Loyalty never justifies breaking the law or the Code and Standards.
Independent practice
Obtain the employer's written consent before paid outside work that could conflict with the employer's interests; seek it with written notice of the services, compensation and duration
Get written consent before starting. Other outside work depends on employer policy and conflict analysis.
Departing employee
Before leaving: no solicitation, no employer time or resources, no taking records. After leaving: general skill and public information allowed
Client lists and confidential records stay with the employer.
Whistleblowing
Permitted when it protects clients or market integrity, not for personal gain
Comes under the priority rule.

How to solve Standard IV(A) Loyalty to Employers questions

Use this order for any Standard IV(A) vignette or essay question.

  1. 1Identify who the employer is and the member's status: employee or independent contractor.
  2. 2Mark the timeline: still employed, in notice period, or already departed.
  3. 3List what the member did or plans to do: outside work, solicitation, using documents, reporting wrongdoing.
  4. 4Test each action against the duty: does it harm the employer, use its resources, or breach confidentiality?
  5. 5Check for consent: if the work is paid and could conflict with the employer's interests, was written consent obtained, sought through written notice of the services, compensation and duration?
  6. 6Check whether a higher duty applies, such as client interests, law or market integrity, including valid whistleblowing.
  7. 7State the conclusion with the command word asked: violated, not violated, or what action is recommended.
  8. 8Give a one-line reason tied to the Standard.

Quickest way: Timeline and consent check

When to use it: Use this on item set questions where you have about two minutes and four answer choices.

  1. Ask: before or after the last day of employment?
  2. If before, and the member solicited clients, used employer resources or took records, expect a violation.
  3. If paid outside work that could conflict with the employer's interests started without written consent, expect a violation.
  4. If after leaving, using memory of general skills or public contacts is usually fine; taking written client lists is not.
  5. If the action reports illegal conduct to protect clients or markets, it is likely permitted.

Common mistakes in Standard IV(A) Loyalty to Employers

  • Thinking loyalty ends when you resign.

    Students link loyalty to the end of the job contract rather than the last day of employment.

    Fix: Loyalty continues through the notice period. Preparing a new firm is fine, but soliciting clients or using resources is not.

  • Saying any outside investment work needs consent.

    Students overgeneralize the independent practice rule.

    Fix: Written consent is needed for paid independent practice that could conflict with the employer's interests. Other outside work depends on the employer's policy and a conflict analysis.

  • Accepting verbal consent.

    Students assume an informal approval from a manager is enough.

    Fix: The Standard asks for written consent before paid outside work that could conflict. Written notice of the services, compensation and duration is how you seek it.

  • Putting employer loyalty above everything.

    The word loyalty suggests obedience.

    Fix: Clients, markets and the law come first. Whistleblowing to protect them is allowed.

  • Assuming a departing employee can take client records.

    Students think the relationships belong to the person.

    Fix: Records and lists belong to the employer. Only general skills and non-confidential knowledge may be used afterwards.

Worked examples

Example 1

Anita is a portfolio manager at Firm X. She plans to join a rival firm in one month. During her notice period she emails her clients from her personal account to say she will be moving and invites them to follow her. She also copies the client contact list to a personal drive. Which Standard IV(A) duties did she breach?

Show the solution
  1. Anita is still an employee, so loyalty applies during the notice period.
  2. Soliciting clients of Firm X before she leaves harms the employer and is not permitted.
  3. Copying the client contact list takes employer records, which belong to Firm X.
  4. Her personal email does not help because the solicitation targets the employer's clients.

Answer: She violated Standard IV(A) by soliciting clients before leaving and by taking the client list. Planning to join a rival is allowed; the solicitation and record copying are not.

Example 2

Raj, an employed analyst, is asked by a friend to manage a small family portfolio for a fee on weekends. He tells his manager verbally, who says it is fine. Did Raj meet Standard IV(A)?

Show the solution
  1. Managing a portfolio for a fee is investment advisory work for pay, so it counts as independent practice.
  2. This work could conflict with the employer's interests, so Raj needed his employer's written consent before starting.
  3. He would seek that consent with written notice describing the services, expected compensation and duration.
  4. A verbal approval from the manager does not meet the written requirement.

Answer: No. Raj did not meet Standard IV(A). The paid advisory work could conflict with his employer's interests, so he needed written consent, sought through written notice of the services, compensation and duration. Verbal approval is insufficient. He should obtain written consent before accepting the fee-paying work.

Exam tips

  • Watch the timeline words: before leaving, after leaving, notice period, now independent.
  • Look for the words written and consent; the Standard asks for written consent before paid outside work that could conflict with the employer's interests.
  • When a vignette mentions client lists or files, treat them as employer property.
  • If an employer instructs something illegal, choose the answer that protects clients and the law.
  • In essays, name the Standard, say violated or not, and give a one-line reason to earn the points.

Standard IV(A) Loyalty 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.

Standard IV(A) Loyalty to Employers: frequently asked questions

Can I solicit clients after leaving my employer?

After you leave, you may contact clients using general knowledge and public information, unless a valid agreement forbids it. You may not use client lists or confidential records that belong to the former employer. You also must not solicit them before you leave.

What must I do before starting independent practice?

If the work is for compensation and could conflict with your employer's interests, obtain your employer's written consent before you start. You seek that consent by giving written notice of the services, the expected compensation and the duration.

How does an employee differ from an independent contractor under Standard IV(A)?

An employee owes a strong duty of loyalty to the employer and follows its rules. An independent contractor has a more limited relationship and may serve other parties, with duties set by the agreement. The Standard is applied to the facts of the relationship.

Is whistleblowing a breach of loyalty?

No, when it is done to protect clients or the integrity of capital markets. Loyalty to the employer does not override those duties. Reporting for personal gain does not qualify.