Views on improving the integrity of global capital markets
21 March 2019

Ethics in Practice: New Professional Opportunities. Case and Analysis–Week of 18 March

Check out the analysis to see how you did in analyzing this week’s case (18 March) and determining which CFA Institute Standard was  involved.

Case

Clemence is a wealth management adviser for DeLaurier Strategic Advisors, where she is responsible for financial planning, portfolio management, estate planning, and general wealth management for more than 400 retail clients. She met many of these clients through her spouse, who is a well-known attorney, and her sister, who is a physician. Clemence decides to resign her position with DeLaurier to take a position at another firm where she will not be expected to generate new advisory clients but will take on more research and investment management responsibilities. She leaves DeLaurier on good terms, providing her supervisor with all the background and information that DeLaurier needs to transition her clients seamlessly to a new account manager. All of her clients have insufficient assets under management to become clients of Clemence’s new firm.

On the day Clemence leaves DeLaurier, she hastily downloads an Excel file listing DeLaurier clients, potential clients, and former clients and sends it to her personal email address. The list includes client names, assets under management, addresses, and phone numbers. Clemence’s intention is to contact her clients as a courtesy to inform them of her new position, thank them for being clients, and express her confidence that DeLaurier will continue to provide them with competent and professional service even though she has left the firm.

Clemence’s actions are

  1. inappropriate.
  2. appropriate because she does not use DeLaurier’s client list to benefit her new firm.
  3. appropriate because she is protecting the interests of her clients.
  4. appropriate as long as she only contacts clients who are personal friends to inform them of her new position.
  5. none of the above.

Analysis

Clemence has violated her duty of loyalty to her employer by copying the client list and taking it with her to use after she leaves DeLaurier. CFA Institute Standard IV(A): Duties to Employers—Loyalty requires that CFA Institute members act for the benefit of their employer and not divulge confidential information or otherwise cause harm to the employer. The client list is the property of DeLaurier. It contains proprietary confidential information about DeLaurier clients that Clemence is improperly using for her own purposes, however benign those purposes may be. It is clear that Clemence is not motivated to use the client list and information it contains to benefit her new firm and is working with DeLaurier to protect the interests of her former clients and to make them feel comfortable in continuing to use DeLaurier as their financial advisor.

Clemence may contact her former clients who are friends through personal channels, such as social media or a personal contact, but she cannot use DeLaurier’s property to facilitate this communication. As an alternative, she could ask DeLaurier’s permission to take her clients’ contact information so that she might send them a final “thank you” correspondence. In hastily trying to get information regarding her clients, Clemence has actually overreached and taken much more information than intended. She has not only taken information about her clients but also that of the firm’s former, current, and potential clients. Choice A is the best answer.

This case is based on a CFA Institute Professional Conduct enforcement action from 2018 that resulted in a Private Censure.

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Have an idea for a case for us to feature? Send it to us at ethicscases@cfainstitute.org.


More About the Ethics in Practice Series

Just as you need to practice to become proficient at playing a musical instrument, public speaking, or playing a sport, practicing assessing and analyzing situations and making ethical decisions develops your ethical decision-making skills. The Ethics in Practice series gives you an opportunity to “exercise” your ethical decision-making skills. Each week, we post a short vignette, drawn from real-world circumstances, regulatory cases, and CFA Institute Professional Conduct investigations, along with possible responses/actions. We then encourage you to assess the case using the CFA Institute Ethical Decision-Making Framework and through the lens of the CFA Institute Code of Ethics and Standards of Professional Conduct. Then join the conversation and let us know which of the choices you believe is the right one and explain why. Later in the week, we will post an analysis of the case and you can see how your response compares.


Image Credit: ©CFA Institute

About the Author(s)
Jon Stokes

Jon Stokes is the Director of Ethics and Standards Education at CFA Institute. His responsibilities include design and creation of on-line ethics education, development and maintenance of the CFA Institute Code of Ethics and Standards of Professional Conduct, and the design and management of the CFA Institute Ethical Decision-Making and Giving Voice to Values education programs. Stokes holds a JD degree.

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