Marc Davidson, CFA, runs a part-time consulting business for trustees without informing his employer. After moving to a competitor, former clients follow him to Legacy Trust Services. Did Davidson’s actions violate the CFA Institute Code and Standards?

Marc Davidson, CFA, runs a part-time consulting business for trustees without informing his employer. After moving to a competitor, former clients follow him to Legacy Trust Services. Did Davidson’s actions violate the CFA Institute Code and Standards?

• A. No
• B. Yes, Davidson's part-time consulting business
• C. Yes, both Davidson's part-time consulting business and soliciting former Integrity clients
• D. Yes, because soliciting former Integrity clients alone violated the standard

Answer: (B)

The main idea here is the obligation to disclose outside business activities to your employer and to avoid conflicts that could affect loyalty to the employer and to clients. Engaging in a part-time consulting business for trustees creates a potential conflict of interest unless it’s disclosed and approved by the employer. The CFA Institute Standards require members to inform their employer about significant outside activities so the firm can assess any conflicts and set boundaries. Because Marc Davidson started this side business without telling his employer, he violated that requirement, regardless of what happens later with clients or competitors. The fact that former clients followed him to the new firm doesn’t by itself prove a violation of the standards. Taking clients to a new employer can occur, especially after a transition, as long as it’s not done through improper solicitation or misuse of confidential information or firm resources. Those specific issues would be separate concerns, but they aren’t established by the scenario as stated.

The main idea here is the obligation to disclose outside business activities to your employer and to avoid conflicts that could affect loyalty to the employer and to clients. Engaging in a part-time consulting business for trustees creates a potential conflict of interest unless it’s disclosed and approved by the employer. The CFA Institute Standards require members to inform their employer about significant outside activities so the firm can assess any conflicts and set boundaries. Because Marc Davidson started this side business without telling his employer, he violated that requirement, regardless of what happens later with clients or competitors.

The fact that former clients followed him to the new firm doesn’t by itself prove a violation of the standards. Taking clients to a new employer can occur, especially after a transition, as long as it’s not done through improper solicitation or misuse of confidential information or firm resources. Those specific issues would be separate concerns, but they aren’t established by the scenario as stated.