Client and employer duties and confidentiality

Suitability starts with the advisory relationship. A professional recommending an investment to a client must make a reasonable inquiry into experience, risk and return objectives, and financial constraints, then update the information regularly. High expected return cannot replace knowledge of the client's horizon, liquidity needs, and obligations. Where a portfolio is managed to a stated mandate or style, the action must also fit that mandate. A risky share can be suitable as a small part of a diversified portfolio yet unsuitable after its position has grown too large. Judge an instrument in the context of the total portfolio, not from a marketing sheet alone.

Fair dealing under Standard III(B) does not require identical trades for every client. It requires a fair, objective process when distributing analysis, making recommendations, and taking action, while considering client interest and suitability. Giving a material report to the manager's friend before other eligible clients can confer an advantage even if everyone receives it by the end of the day. A simultaneous dissemination procedure or a documented allocation rule helps control this risk. A family member's account is not automatically excluded merely because of the relationship; apply a fair procedure to it.

Confidentiality protects information about current, former, and prospective clients. CFA Institute identifies specific exceptions involving illegal client activity, disclosure required by law, or client permission. An exception does not authorize broadcasting a file to every colleague. Check the legal or authorized scope and seek compliance advice when uncertain. Loyalty to an employer does not cancel client confidentiality. If a client offers an analyst a personal performance bonus, Standard IV(B) calls for written consent from all parties involved before accepting an arrangement that may conflict with the employer's interest. A verbal announcement after payment does not serve that purpose.

Use the seven conduct-standard groups to diagnose a case: I Professionalism (law, independence, accurate representation, misconduct, competence); II Market Integrity (material nonpublic information and manipulation); III Duties to Clients (loyalty and care, fairness, suitability, performance presentation, confidentiality); IV Duties to Employers (loyalty, outside compensation, supervision); V Analysis and Recommendations (reasonable basis, communication, records); VI Conflicts (disclosure, transaction priority, referral fees); VII Membership, program participation, and designation references. This is an application index, not a substitute for the official text and conditions. CFA Institute’s Professional Conduct program educates, deters, and investigates allegations; violation and sanction decisions follow a multilevel peer-review process under bylaws and procedures. Sanctions can suspend or revoke membership or designation use, and candidates may be suspended or barred from programs. An allegation is not a finding, and professional discipline does not replace immediate client protection or local law. Prevention starts with documented allocation policy, control of material information, personal-interest register, compensation approvals, training, supervision, escalation, and tests on real violation scenarios.