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FRM Part I · FRM Exam Part I · GARP Code of Conduct

A risk consultant and FRM holder is engaged by Firm A to design a counterparty limit framework. Midway through, Firm B, a direct competitor of A, offers a larger engagement and asks him to use the framework's proprietary parameters already developed for A. He also owns a small equity stake in Firm B. Which course of action best complies with the GARP Code of Conduct?

He should keep Firm A's parameters confidential, disclose both the equity stake and the competing engagement to affected parties, and accept Firm B's work only if no conflict or breach results. Reusing or lightly altering Firm A's proprietary work would breach confidentiality under the GARP Code.

  1. AAccept and reuse the parameters, since the consultant authored them
  2. BAccept Firm B's work after disclosing the equity stake to Firm B only
  3. CUse the parameters but change a few numbers so the work is not identical
  4. DKeep Firm A's parameters confidential, disclose the equity stake and the competing engagement to the relevant parties, and only take Firm B's work if no conflict or confidentiality breach resultsCorrect

Explanation

Firm A's parameters are confidential client information, so reusing them breaches the confidentiality obligation. The equity stake is a potential conflict requiring disclosure to affected parties, not just one. Cosmetic changes do not cure the use of confidential material.

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