Which of the requests, if fulfilled, is most likely to place Basch in violation of Standard III(E) Preservation of Confidentiality?

A potential client contacted an employee and wanted detailed performance records of client accounts so he can decide whether to invest with the firm."

Basch goes on to say that she is responsible for developing a presentation on the differences between the Prudent Investor and the Prudent Man rules for managing trust portfolios. Basch explains to Cooken that the Prudent Investor rule requires a trustee to exercise five fiduciary standards in managing the assets of a trust account, including care, skill, caution, loyalty, and impartiality. She states that although there are many differences between the Prudent Man and the newer Prudent Investor rule, one element of continuity is the duty of the trustee to delegate investment authority in the event that the trustee lacks sufficient investment knowledge.

Toward the end of the lunch meeting, Basch suggests that in exchange for research published by Cooken and Khasko, Basch can have portfolio managers at her firm send clients that are too small for their firm to Khasko. Since Khasko specializes in clients with smaller portfolios, the arrangement sounds like a good idea to Cooken. Cooken tells Basch that she will think the arrangement over and get back with her next week with a decision.

Which of the requests, if fulfilled, is most likely to place Basch in violation of Standard III(E) Preservation of Confidentiality?
A . Request 1.
B . Request 2.
C . Request 3.

View Answer

Answer: C

Explanation:

Request 3 is a likely violation. Potential clients are not entitled to performance data beyond what the company chooses to disclose. Providing data, particularly client-specific data, could he a violation of the clients’ confidentiality.

Members and candidates must answer questions asked by CFA Institutes Professional Conduct Program. Members and candidates may report illegal activities (and in some cases may have a legal obligation to report such activities) on the parr of clients without fear of violating Standard 111(E) Preservation of Confidentiality, so 1 is not likely a violation. And unless the firm’s policy requires silence about job openings, answering questions about them is ethical, if not always wise, so 2 is not likely a violation. (Study Session 1, LOS 2.a)