Ethics-3A -Presevation of Confidentiality question question

meghanjackson

on pg 67 CFAI texts, they say if APPLICABLE LAW requires members to maintain confidentiality they should EVEN if client is doing something illegal.

Huh?

I thought we have to comply with the MORE strict law...which would be CFAI Standards. This would entail not maintaining confidentiality and reporting it.

Could someone please clear this up?

giorgio10

Whoops! typo in the subject line...meant 3 E !!!

ayaz_mahmud369

First of all, if the law and CFAI standards conflict, you go with the law. CFAI will never have you do anything blatantly illegal.

Secondly, CFAI does not require to to report a client doing something illegal UNLESS required by law. They say it is often recommended and prudent to do so, but not required (unless the law says you have to).

smuggycfa

The client confidentiality ruling requiring them to not report confidential information, even if it is illegal, is the more strict rule, so it trumps the handbook in this case.

5566

hmm i get that CFA doesnt want you to report anything UNLESS it's illegal.

CFAI say...

" M & C must comply with applicable law...if applicable law requires m&c to maintain confidentiality, even if the information concerns illegal activities on the part of the client, m&c should not disclose such information" pg 67.2nd paragraph of 3E.

Can someone please clear this up?

Which is the more strict law in this case? In my understanding it would be CFAI since applicable law allows client to continue illegal activity therefore losing integrity of capital markets .

19831985

It will be the applicable law.

In a more... intuitive reasoning. CFA institute is just an organization recognized by the investment community and holds no regulatory power. The Institute will have no say in legal matters and will not be able to over-rule any legal action sanctioned by the government. Therefore the CFA Institute will not be asking you be break any laws. Only abide by the stricter rule if no laws are being broken. And abide by the law at all times (hence the "Knowledge of the Law" Standard).



Edited 2 time(s). Last edit at Sunday, May 30, 2010 at 09:27AM by joseph213.