Page 30 - FINAL CFA II SLIDES JUNE 2019 DAY 1

MODULE 2.6: READINGS 1 AND 2: CFA INSTITUTE CODE OF ETHICS AND STANDARDS OF
PROFESSIONAL CONDUCT GUIDANCE FOR STANDARDS I–VII
STANDARDS III(D) AND III(E)
III(E) Preservation of Confidentiality.

Keep information about current, former, and prospective clients confidential unless: (1) The information concerns illegal activities on the part of the
client or prospective client, (2) Disclosure is required by law, or (3) The client or prospective client permits disclosure of the information.

Recommended Procedures for Compliance
• Avoid disclosing information received from a client except to authorized co-workers who are also working for the client.
• Follow firm procedures for storage of electronic data and recommend adoption of such procedures if they are not in place.

Application of Standard III(E) Preservation of Confidentiality
Vignette 1: 1
Sarah Connor, a financial analyst employed by Johnson Investment Counselors, Inc., provides investment advice to the trustees of City Medical
Center. The trustees have given her a number of internal reports concerning City Medical’s needs for physical plant renovation and expansion.
They have asked Connor to recommend investments that would generate capital appreciation in endowment funds to meet projected capital
expenditures. Connor is approached by a local business man, Thomas Kasey, who is considering a substantial contribution either to City Medical
Center or to another local hospital. Kasey wants to find out the building plans of both institutions before making a decision, but he does not want
to speak to the trustees.

Analysis:

• The trustees gave Connor the internal reports so she could advise them on how to manage their endowment funds.
• Because the information in the reports is clearly both confidential and within the scope of the confidential relationship, Standard III(E) requires that
Connor refuse to divulge information to Kasey.

Review examples 2-5