IBBC CAPITAL ACADEMY / 2027
Loyalty, outside compensation and supervisory controls
Independent IBBC Capital draft content for self-study. Not affiliated with or endorsed by CFA Institute. New lessons await subject-matter review. No CFA designation or official PSM credit is awarded.
Learning goals
- Diagnose the conduct from the facts and relevant professional duties.
- Recommend a documented preventive and corrective response.
Draft · approximately 60 minutes, excluding further revision.
Decision case · fictional facts
A fictional team leader plans a competing firm while still employed. She copies confidential client files and accepts a paid outside mandate that could conflict with work without written consent from the relevant parties. She also ignores repeated unauthorized-trade alerts from a subordinate because monthly profits are high.
Duties and competing interests
Employment loyalty protects the employer’s legitimate interests without requiring participation in misconduct or ignoring client interests. Preparing to leave is different from soliciting clients or misappropriating confidential records while employed. General skills and remembered experience differ from proprietary files; contracts and applicable law can impose additional duties.
Outside benefits that could create competing interests require the specified written consent, not merely an informal remark to one colleague. Supervisors must make reasonable efforts to establish and enforce effective compliance systems. Delegation does not eliminate supervisory responsibility; known red flags require a timely documented response.
Decision, controls and remaining uncertainty
Stop copying and secure the employer’s confidential records; clarify permissible departure preparations and applicable restrictions. Disclose the outside arrangement fully and obtain required written consent before accepting conflicting benefits.
Investigate the alerts promptly, restrict activity where appropriate and improve controls, escalation and review. Profits do not establish that the trades were authorized or that supervision was adequate.
Formula and assumptions
Identify facts → duties → affected parties → feasible action → evidence and follow-up
Compare with the model response after drafting
- Stop copying and secure the employer’s confidential records; clarify permissible departure preparations and applicable restrictions. Disclose the outside arrangement fully and obtain required written consent before accepting conflicting benefits.
- Investigate the alerts promptly, restrict activity where appropriate and improve controls, escalation and review. Profits do not establish that the trades were authorized or that supervision was adequate.
Errors to catch
- Treating disclosure, client consent or a supervisor’s instruction as permission for prohibited conduct.
- Inventing missing facts or treating a potential concern as a proven legal violation.
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Sources and coverage status
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