This case relates to disclosure of conflicts of interest. CFA Institute Standard VI(A): Disclosure of Conflicts requires CFA Institute members to make full and fair disclosure of all matters that could reasonably be expected to interfere with their duties to clients or employers. In this case, Archer’s personal relationship with his client is a potential conflict that should be disclosed to his employer because he may have an incentive to neglect other advisory clients in favor of Lucy’s account as a way to enhance their relationship.
Archer is not violating confidentiality or any duty to his former employer by examining the investment records of his former client because the client provided those records to him; he did not access them inappropriately. He does not have a duty of loyalty to Lucy’s husband, a former client, because he is no longer his investment adviser. Presumably, Archer understands that Lucy is using joint marital assets to open a personal account, without the consent of her current husband. If Archer knows that Lucy is acting in contravention of the law or a court order or is perpetrating a fraud against her husband in using those assets to open the account, Archer would also be violating Standard I(D): Professional Misconduct, which prohibits members from engaging in any professional conduct involving dishonesty, fraud, or deceit. Without further information indicating any fraud, deceit, or dishonesty, choice C is the best response.
This case is based on facts provided by Tanuj Khosla, CFA, CAIA.