Duties of Loyalty and Care in Investment Advice

Very Hard Cfa Institute Code And Standards Duties - Loyalty And Care

Alice is a portfolio manager at a large investment firm. She is approached by a friend who is looking to invest a significant sum of money in a start-up company that Alice knows little about, but has potential given its industry growth prospects. Alice is excited about the opportunity for her friend and considers allocating some of her recently gained insights about the company into the friend's investment pitch. However, she has not performed comprehensive due diligence on the investment and fears she may not be able to provide the most accurate and loyal advice regarding the investment.

In this scenario, which of the following actions would best align with the CFA Institute's Code of Ethics and Standards of Professional Conduct regarding the duties of loyalty and care?

Alice should provide her friend with the insights she has about the company, even if she hasn’t fully researched it.

Alice should decline to comment on the investment until she has performed thorough due diligence.

Alice should recommend the investment to her friend, believing her own understanding of the industry is sufficient.

Hint

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