Standard III: Duties to Clients: practice question

Iris Fellhauer, CFA, a relationship manager at Stannard Private Bank, receives an order from her country's securities authority, issued under a statutory power, requiring the bank to produce the trading records of a named client for a defined period as part of an investigation. The client, informed of the demand, urges Fellhauer to resist it. Her most appropriate course is to:

1. withhold the records unless the client consents to their release or a court orders them disclosed over his objection
2. confirm the order's validity and exact scope with the bank's legal function and then produce the records the authority is entitled to
3. deliver the client's complete file at once, including documents beyond those the order calls for, as a show of full cooperation

Show answer and explanation

Correct answer: B

Explanation: B is correct. A disclosure compelled by a lawful order of the authority is exactly what Standard I(A) expects a member to comply with, and the prudent course is to verify through the bank's legal function that the order is genuine and to establish precisely what it covers before releasing anything. A is incorrect because the client's consent is not a condition of a legally required disclosure; treating consent as a gate would put the member in the position of obstructing an authority the law empowers. C is incorrect because producing more than the order requires discloses client information the law has not asked for, breaching the confidentiality the member owes on everything outside the order's scope.