CFA Practice Question
Standard III (E) - Preservation of Confidentiality states:
II. if information is confidential, even illegal activity may not be reported, because there is the issue of trust between parties.
III. members should avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client.
I. members must release information to CFA Institute when the Professional Conduct Program is holding an investigation, unless there is a settlement agreement between the parties that stipulates confidentiality.
II. if information is confidential, even illegal activity may not be reported, because there is the issue of trust between parties.
III. members should avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client.
A. I and II
B. III only
C. None of these answers
Explanation: Under Standard III (E), members shall preserve the confidentiality of information communicated by clients within the scope of the client-member or employer-member relationship, except when the member receives information concerning illegal activity on the part of the client. When there is an investigation under PCP, members shall provide information about a client in support of the investigation. Settlement agreements with confidentiality clauses do not prohibit members from cooperating with a PCP investigation.
User Contributed Comments 13
| User | Comment |
|---|---|
| ticomico | III is in contradiction with the standard IV, because members shall disclose information about their clients when there is an investigation. |
| murli | III is not in violation, because members can disclose information to their collegues. Refer Page 68 of CFA Institute standards book - Procedure for compliance section. |
| swift | you're right ....'except to authorised fellow employees who are also working for the client' sounds like III |
| Lola | III is indeed the best procedure for compliance but it is not STATED in the standard |
| dimos | I am quite sure that III is not in contradiction with the standard according to the reading |
| george2006 | III is incorrect because it doesn't qualify with "unless ... " exceptions. |
| smillis | regarding III, a client could be large with multiple activities such that some could influence others...so although colleagues are working with the same client their could be confidential info that should not be shared. |
| mulira | the key word that makes c wrong is avoid. it should be "should not" |
| Birdy101 | p.67 CFA curriculum: ...avoid disclosing any info...EXCEPT to authorized fellow employees who are also working for the client.... standard might have changed but not the answer... III is correct. |
| steved333 | Thanks, mulira. Do not avoid it, just plain don't do it! |
| vadklim | "... except when the member receives information concerning illegal activity on THE PART OF THE CLIENT ..." What if a member gets confidential information from the client concerning illegal activity of a third part, for example, the client's supplier, which is NOT the member's client. Should this information be disclosed in support of the investigation? |
| docinho2008 | III does not mention that information is confidential (it says "avoid disclosing any information").. the point is avoid disclosing confidential information... I guess |
| ashish100 | it feels like CFA is just blackmailing their members to get confidential info when they are doing their investigation. "either you tell us what happened, or we're gonna strip you from you designation even if we are not the popo" i'll give them anything they need in a jiffy tho. lol |