Adira Badawi, CFA, who owns a research and consulting company, is an independent board member of a leading cement manufacturer in a small local market. Because of Badawi’s expertise in the cement industry, a foreign cement manufacturer looking to enter the local market has hired him to undertake a feasibility study. Under what circumstances can Badawi most likely undertake the assignment without violating the CFA Institute Code of Ethics and Standards of Professional Conduct? If he:
- makes full disclosure to both companies.
- receives written permission from the local company.
- signs confidentiality agreements with both companies.
A is correct, I don’t understand this. Don’t you need written permission
Hi Akshay,
In the above question, you need to make the disclosure to both the companies, as they both are competitors in the same industry. It doesn’t matter if one is local and the other is foreign.
The local one may fear that you could share their secret of trades with the foreign company, and the foreign company may think you will use their company’s knowledge for the benefit of the local company. By making the disclosure, you transfer the burden of trust on the companies themselves, where they need to consider on their part whether they will be ready to trust you and appoint you irrespectively for the future. No written permission may not specifically be required unless told by the law of the company’s policies.
Hope this helps.