Ethical Decision-Making in Client Advisory

Medium Professional Standards Application Ethical Decision-making

As a portfolio manager at an investment firm, you are approached by a long-time client seeking advice on a significant investment decision. The client discloses that they are considering investing a substantial amount of their personal funds into a financial instrument that your firm is currently developing. This product is expected to yield considerable returns but also comes with significant risks. The client is pressuring for a quick decision, citing their need to capitalize on a limited-time opportunity.

You know that your firm has a conflict of interest in this situation, as you stand to gain commissions or performance fees if the client invests. Additionally, you feel uncomfortable with the high-pressure tactics used by the client. In light of the CFA Institute's Code of Ethics and Standards of Professional Conduct, what is your best course of action?

Proceed with the investment recommendation but ensure the client is aware of the risks involved.

Ignore the client's pressure and recommend that they seek independent financial advice.

Suggest the client take some time to consider their options before making any investment decision.

Hint

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