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CFA Level I · CFA Level I Exam · Guidance for Standard III: Duties to Clients

A portfolio manager, Lena Fischer, learns during a review that a client is using her account to launder money obtained from fraud. Applicable law does not prohibit her from reporting this. Under Standard III(E), Fischer most likely:

Fischer may disclose the information. Standard III(E) permits breaking confidentiality when the information concerns illegal activities by the client, and she may have an obligation to report to the appropriate authorities. Client permission is not required for this exception.

  1. Amust keep the information confidential, because client information is protected even when it concerns wrongdoing
  2. Bmay disclose the information, because it concerns illegal activities on the part of the clientCorrect
  3. Cmay disclose it only after the client has given written permission to report

Explanation

Standard III(E) lists information concerning illegal activities on the part of the client as an exception to the duty of confidentiality. Fischer may therefore report to the appropriate authorities. Requiring client permission is wrong because the exception applies independently of permission. She should still consult compliance or legal counsel when in doubt.

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