Ethical Decision-Making in Investment Management

Very Hard Professional Standards Application Ethical Decision-making

Richard is a portfolio manager at a prominent investment firm, known for his ethical conduct and the integrity of his investment strategies. Over the past few months, he has been secretly contemplating a personal investment in a company that his firm has been considering for a large acquisition. He has access to non-public information about the company's upcoming merger which, if revealed, could significantly affect the company's stock price. Despite his reservations about this potential conflict of interest, Richard is considering proceeding with the investment before the merger announcement.

As Richard weighs his decision, he recalls the CFA Institute's Code of Ethics and Standards of Professional Conduct, which emphasize the importance of integrity, diligence, and the duty to act in the best interest of clients. The company's management has not yet disclosed the merger to the public, and Richard knows that acting on this information could constitute insider trading.

Given this scenario, what should Richard do to ensure he adheres to the ethical guidelines set forth by the CFA Institute?

Proceed with the investment now, as long as Richard does not disclose any non-public information to his clients.

Wait until the merger announcement is made public before making any personal investment in the company.

Consult with the compliance department to seek approval for the investment based on the potential benefits for his clients.

Hint

Submitted10.8K

Correct9.2K

% Correct85%