Ethical Conflict of Interest: John's Investment Dilemma

Medium Professional Standards Application Conflicts Of Interest

A financial analyst, John, works for an investment firm that manages a significant amount of money for a variety of clients, including a large corporation, X Corp, that is planning to go public. John has access to non-public information about X Corp's IPO plans, which is expected to significantly affect their stock price. During this time, John also has a personal investment in a rival company, Y Corp, which could be negatively impacted by the rising value of X Corp's stock.

Question: What should John do to adhere to the CFA Institute's Code of Ethics and Standards of Professional Conduct regarding conflicts of interest?

John should maintain his investment in Y Corp and continue to trade based on the public information available.

John should disclose his personal investment in Y Corp to his employer and consider divesting his investments before acting on any recommendations related to X Corp.

John should keep his personal investment in Y Corp confidential and avoid discussing it with colleagues.

Hint

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