Disclosure of confidential information to CFAI PCP

[Oleg]

Hi! Can somebody explain what is the reasoning behind the requirement that CFA members and candidates disclose confidential information about their client to CFAI PCP even if they have special confidentiality agreement with the client. And how does it reconcile with priority of the law over the Code of Ethics? Thanks.

 

[S2000magician]

CFA Institute will treat the confidential information with the same care as you would; it won’t be disclosed.
The reasoning is that such information may be required in an Ethics investigation, and, as there is a great upside (vile Ethics violators are punished) and essentially no downside (confidentiality is preserved), the greater good is served by disclosure.

 

[Oleg]

Thanks. And what if a confidentiality agreement with the client clearly prohibits disclosure to third parties (which CFA Institute certainly is?) Just having difficulty understanding how can provisions of the Standards override the provisions of the confidentiality agreement.
And what if the beneficiary of the PCP investigation is not the client whose information is disclosed?

 

[S2000magician]

Think of CFA Institute as an extension of the covered person.
I know that it sounds troublesome, but them’s the rules.

 

[aydarm16]

I think the beneficiary of any CFA investigation is the whole investing public and capital markets as a whole.

 

[picton]

Oleg wrote:
Thanks. And what if a confidentiality agreement with the client clearly prohibits disclosure to third parties (which CFA Institute certainly is?) Just having difficulty understanding how can provisions of the Standards override the provisions of the confidentiality agreement.
And what if the beneficiary of the PCP investigation is not the client whose information is disclosed?

Honestly I would watch it. I am not a lawyer and this is not legal advice but nearly all the NDAs I’ve seen (must be in the hundreds now) only make carve outs or exceptions for injunctions or otherwise legally enforcable acts from state authorities and agencies (think SEC, court rulings etc.). NDAs aren’t generally the most respected pieces of paper out there, but releasing confidential client data is kind of a big one and certainly merits some consideration.