Sub-topic 2: Duties to Clients and Employers (CFA Preparation)
This module delves into the crucial ethical obligations investment professionals owe to their clients and employers. Understanding and adhering to these duties is fundamental to maintaining trust, integrity, and professionalism in the financial industry. We will explore the core principles and practical applications of these ethical standards.
Core Duties to Clients
The CFA Institute's Code of Ethics and Standards of Professional Conduct outline several key duties owed to clients. These are designed to ensure that client interests are always placed first.
To act in the best interest of the client.
Duties to Employers
In addition to client duties, investment professionals have significant responsibilities towards their employers. These duties ensure the integrity of the firm and its operations.
The CFA Institute's Standards of Professional Conduct are the benchmark for ethical behavior in the investment management industry. Understanding and applying them is essential for career success and maintaining public trust.
Practical Application and Scenarios
Let's consider how these duties apply in real-world situations.
| Scenario | Client Duty | Employer Duty |
|---|---|---|
| Receiving a referral fee for recommending a specific fund. | Must disclose the fee to the client and ensure the recommendation is in the client's best interest. | Must comply with employer's policy on referral fees and disclose to employer. |
| Learning about a significant upcoming merger before it's public. | Cannot trade on this information for personal gain or for a client's gain (insider trading). | Must maintain strict confidentiality and report to compliance if necessary. |
| A client asks for advice on an investment you are not familiar with. | Must either gain competence through study or decline the request. | May need to inform employer of the request and seek assistance. |
The relationship between client, investment professional, and employer can be visualized as a triangle. The investment professional sits at the apex, with direct duties to both the client (bottom left) and the employer (bottom right). The client's interests should always be the highest priority, influencing decisions made in relation to both the client and the employer. The employer's policies and compliance framework provide the foundation and structure within which the professional operates.
Text-based content
Library pages focus on text content
Key Takeaways
Mastering the duties to clients and employers is not just about passing an exam; it's about building a sustainable and reputable career in finance. Always strive for transparency, diligence, and integrity in all your professional interactions.
To act with integrity and loyalty.
Learning Resources
The official and most authoritative source for the Standards of Professional Conduct, detailing all ethical requirements for CFA charterholders and candidates.
Access the official curriculum which includes detailed explanations and examples of ethical standards, including duties to clients and employers.
Explore practical scenarios and their ethical implications, helping to solidify understanding of duties to clients and employers through real-world examples.
Provides a good overview of the CFA program, including the importance of ethics and professional conduct in the curriculum.
A video explanation focusing on the specific duties investment professionals owe to their clients, often used for exam preparation.
A video tutorial that breaks down the ethical obligations investment professionals have towards their employers.
A comprehensive guide to CFA ethics, covering key standards and their application, including duties to clients and employers.
Offers insights and study tips for the ethics section of the CFA exam, with a focus on practical application of standards.
Provides background information on the CFA designation, including the rigorous ethical standards that are a core component of the program.
A practical framework to guide investment professionals through complex ethical dilemmas, applicable to duties to clients and employers.