Ektron CMS400.Net Reference
Whenever a new content folder is created and permissions given to it, a corresponding library folder is created. The new folder inherits permissions from the content folder.
Items added to library folders are only accessible by users with permission to the corresponding content folder. If items are added to a library folders directly under the main library folder, all users with at least library Read-Only permissions can use those library items in their content.
Conversely, if a library item is uploaded to a folder to which only one person has permissions, that is the only user who can use that library asset.