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Subject 12. Standard IV (A) Loyalty PDF Download


A. Loyalty.

In matters related to their employment, Members and Candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information, or otherwise cause harm to their employer.

Independent practice

Members shall not undertake any independent practice that could result in compensation or other benefit in competition with their employer unless they obtain written consent from their employer.

  • "Practice" means any service that the employer currently makes available for payment.
  • "Undertake" means that the member actually has to participate in such activities while the member is still employed in order to violate this standard.

If members and candidates plan to engage in independent business while still employed, they must provide a written statement to their employer describing the types of services, the expected duration, and the compensation.

Note: Members have to participate in the activities. They do not actually have to receive any remuneration for this standard to apply.

Leaving an employer

Until their resignation becomes effective, members and candidates must continue to act in the employer's best interest, and must not engage in any activities that would conflict with this duty. A member can make preparations (but not undertake competitive business) to begin a competitive business as a departing employee, provided that the preparations do not breach the employee's duty of loyalty. Examples of this would be finding office space to rent for a member's future business.

Nature of employment

You can be exempt from the standard if you are an independent contractor.

Definition of employee: someone in the service of another who has the power to control and direct the employee in the details of how work is to be done. An employee is not a contractor (you cannot control the details of how a contractor does a job). Employment relationship does not require written or implied contract or actual receipt of monetary compensation.


  • You get a new job, but before leaving your current job you solicit your employer's clients (for both current and potential clients).
  • Misuse of confidential information or misappropriation of trade secrets (e.g., taking home client lists, investment statements, marketing presentations, and buy lists).
  • You provide consulting services on your own time. You must get written consent from your employer.
  • Copying your employer's computer models and other property.
  • Encouraging colleagues to leave your employer to join your new company.

Example 1

You agree to serve as an investment advisor to a non-profit institution run by a friend. Your firm provides similar services, but you elect to do this on your own for a very modest fee. Even if no fee was involved, you are obliged to obtain written consent from your employer.

Example 2

An independent investment advisor is hired by a brokerage firm. However, she wants to keep her existing clients for herself. In this case, she must get the employer's written consent.

User Contributed Comments 6

User Comment
bobert If you have left the company, and are no longer an employee, why is it a violation to encourage colleagues to leave the employer to join your new company? Or is that just while employed?
wink26 Are you allowed to retain information on your own clients after you leave a firm. I could understand that you shouldn't be allowed to take a general firm directory of clients, but is taking information about your own clients considered a violation?
jnacey You are allowed to take with you the information that is in your "brain." If you remember client details you are welcome to contact them once your resignation becomes effective, however, you cannot retain entire clients lists even if they were clients that were under your direct advisement.
nabilhjeily you solicit your employer's client what does that mean?
gerdvar That means that you actively ask or encourage the clients to follow you to your next employment, you can't do that until you've officially left the previous employers. Also note, that you are allowed to take client info as soon as it's a very basic and could be found on a public manner ie. names
MonuPanda what if i by heart all the client list and store it in my brain.. Will that be a violation?
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