Learning Module 6 of Ethical and Professional Standards 10–15% of the exam

Guidance for Standard IV: Duties to Employers

3 lessons. About 18 minutes in cram mode, 84 minutes in full.

Start with lesson 1 Learn with Sensei Read the module summary Practice this module

Lessons

1
Standard IV(A): Loyalty (to employers)
demonstrate 8 min cram, 36 min full
2
Standard IV(B): Additional Compensation Arrangements
demonstrate 4 min cram, 20 min full
3
Standard IV(C): Responsibilities of Supervisors
demonstrate 6 min cram, 28 min full

What the exam expects you to do

Demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity.Standard IV(A): Loyalty (to employers)
Recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct.Standard IV(A): Loyalty (to employers)
Identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards.Standard IV(A): Loyalty (to employers)

Module summary

The whole module on one sheet, organised by lesson: what to memorize, how the ideas fit together, the formulas and the key terms. No paragraphs, just what you need to revise.

Hide what I know

How deeply to learn each part

Know the idea: Understand it in general. It frames other topics, but you will not calculate with it.
Use it: Understand it well enough to solve a question with it. Recognize when it applies.
Memorize: Learn it by heart. The exam will not give it to you.

Standard IV(A): Loyalty (to employers)

Known

MemorizeStandard IV(A): what to know cold

Situation	The rule
Duty	In job-related matters, act for the employer's benefit; never harm it. Clients and market integrity still come first
Independent business	Competing paid work: notify the employer, describe the services, compensation and duration, get consent before starting
Before leaving	Prepare on your own time and resources. No soliciting clients or prospects, no taking or copying records, models or client lists, no promoting the new employer, no disparaging the current one
After giving notice	Duty runs until employment actually ends. You may tell clients you are leaving and name the new firm; give no new contact details, no description of its services, no promotion without the employer's permission
After leaving	Contact former clients from public sources or memory. Skills and experience are yours. Check any non-compete
Whistle-blowing	Acting against the employer to protect clients or market integrity (not for personal gain) is not disloyal
Contractors	Covered too. The degree of control decides employee or contractor
Social media	Follow firm policy, including on announcing a departure. Firm-approved business accounts belong to the firm

Memory hook Prepare on your own time; solicit and take nothing until you are gone. Memory and public sources travel with you, files do not.

Know it cold Planning is allowed. Soliciting, copying and competing for pay without consent are not.

Key terms

duty of loyalty to the employer Memorize
independent business Memorize
leaving an employer Memorize
solicitation Memorize
client records Memorize
non-compete agreement Use it
whistle-blowing Memorize
nature of employment Use it
social media accounts Use it

Standard IV(A): what loyalty allows

Duty of loyalty to the employerjob-related matters; clients and markets rank higher

While still employed Memorize act in the employer's interest
- Allowed register a firm, rent an office, plan, on your own time and resources
- Not allowed solicit clients or prospects, copy lists, files or models, misuse confidential information, promote the new employer, disparage the current one
After giving notice Memorize the duty runs until employment actually ends
- Allowed tell clients you are leaving and name the new firm
- Not allowed without the employer's permission new contact details, a description of the new firm's services, promotion
Competing paid work on the side Memorize independent business
- Notify the employer first describe the services, compensation and duration
- Start only after consent
After you have left Memorize the knowledge is yours, the records are not
- Allowed public sources, memory, skills and experience
- Not allowed the firm's records, or anything a valid non-compete bars
Never a breach
- Whistle-blowing aimed at protecting clients or markets

Standard IV(B): Additional Compensation Arrangements

Known

MemorizeStandard IV(B): what to know cold

Point	The rule
Trigger	Pay or benefits that compete with the employer or could reasonably create a conflict
Consent	Written, from all parties involved, before accepting
Written means	Any documented form, including a retrievable email. Verbal is not enough
Report contents	The nature, approximate amount and duration, confirmed by the party offering it
Report to	The supervisor and compliance officer, immediately
Not this Standard	Whether a gift threatens independence: that is I(B). Disclosing conflicts: VI(A)

Memory hook If it could pull your loyalty, get it in writing first: what, how much, how long.

Know it cold Competing or conflicting benefit + no written prior consent = violation. Verbal or after-the-fact consent does not count.

Key terms

additional compensation Memorize
written consent Memorize
all parties involved Memorize
client bonus Use it
outside directorship Use it

Standard IV(B): what to do before accepting

Extra pay or benefit from someone other than your employercash, trips, directorships, fees

Does it compete or risk a conflict? Memorize if not, IV(B) is not triggered
- Client bonus tied to performance
- Paid directorship or consulting fee
- Payments from a broker or supplier
Written consent first Memorize
- All parties involved in practice the employer, with the payer's terms confirmed
- Written, including email verbal is not enough
- Before accepting never afterward
What the written report states Use it
- Nature of the compensation
- Approximate amount
- Duration of the arrangement

Standard IV(C): Responsibilities of Supervisors

Known

MemorizeStandard IV(C): what to know cold

Point	The rule
Who is a supervisor	Anyone with employees under their control or influence, members or not
Duty	Reasonable efforts to prevent and detect violations through an effective compliance system
On a suspected violation	Act promptly, investigate the scope, restrict or monitor the employee meanwhile, review procedures
Not enough	A warning, the employee's assurances, or only reporting up the chain
Inadequate system	Tell senior management, recommend fixes, and decline supervision in writing until procedures are adopted
Liability	Not for every violation: a reasonable system that a determined employee evades is not the supervisor's breach

Memory hook Prevent, detect, respond: a system before the problem, then investigate and restrict the moment something looks wrong.

Know it cold Reasonable efforts judged by the system and the response. A reminder is never a response.

Key terms

supervisor Memorize
reasonable efforts Memorize
compliance system Memorize
detection Memorize
adequate compliance procedures Memorize
declining supervisory responsibility Memorize
compliance training Use it

Standard IV(C): a supervisor's duties

Reasonable efforts to prevent and detect violationsby everyone under your supervision or authority

Build the system Memorize before any violation
- Adequate compliance procedures written, tailored, easy to follow
- Designated compliance officer clear authority and resources
- Training and incentives reward ethical behavior
Detect Memorize
- Monitor and review check procedures are followed
Respond to a violation Memorize
- Respond promptly and investigate do not rely on assurances
- Restrict or monitor the employee pending the outcome
- Review procedures prevent a repeat
System inadequate Memorize you cannot supervise
- Tell senior management and recommend fixes
- Decline supervision in writing until reasonable procedures are adopted