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I have a very simple scenario for a security requirement that I am trying to accomplish with Team Owners and Member's Privilege Inheritance set to Direct User (Basic access level) and Team Privileges
I follow the below documention and the scenario is described below
I need to create teams with more than one user as a members and all users in that team should be able to read/write records and all members on the team should be able to see/edit all records created by members of the team.
I created a security role that have Create/Read/Write/Append and AppendTo Privileges setup at the User level on a handfull of entities 2 Built-in (Contact and Activities) and 1 custom entity (Incident). The security roles is set to have Member's Privilege Inheritance set to Direct User (Basic access level) and Team Privileges
Then when user1 creates a contact user2 can see and viceversa, but when user1 creates a record on the custom entity (Incident) user2 can't see it and viceversa.
I dont undertand the difference on the behavior of the custom entity vs the Built-in entity. Both entities are setup the have Ownership at the entity level (Owner or Team).
The only way that user2 can see records created by user1 is to explicitely setup the ownership of the records to be the Team where they both belong... but that is not necesary for the contact records.
I tested your situation. The test result is that for a contact, as long as its owner is User 1, then User 2 cannot access this contact.
It has the same result as the custom entity.
So please check the other security roles of User 1 and User 2 if they have higher level permissions for Contact entity.
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