Understanding Conflicts of Interest in Investment Management

Hard Professional Standards Application Conflicts Of Interest

Claire is a CFA charterholder and a senior portfolio manager at a respected investment firm. Recently, she was approached by a family member who owns a startup seeking capital investment. The family member has asked Claire to consider investing client funds into the startup, which offers the potential for high returns. Claire is torn because she knows that, as a family member, she could be viewed as biased in her investment recommendations, yet the startup appears to be a promising venture.

In this situation, what should Claire prioritize to adhere to the CFA Institute’s Code of Ethics and Standards of Professional Conduct regarding conflicts of interest?

Claire should disclose her family relationship to her clients and recommend the investment if the clients are interested.

Claire should refuse to consider the investment opportunity and redirect her family member to seek independent sources of funding.

Claire may proceed with the investment if she believes it is in the best interest of her clients, regardless of her family ties.

Hint

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