Ethical Decision on Insider Information

Medium Ethical Decision-making Integrity Of Capital Markets

Jordan is a portfolio manager at a well-respected investment firm. They have just received a tip from a friend, who is a corporate executive at a technology company, about an upcoming product launch that is expected to significantly increase the company's stock price. The executive has requested that Jordan not share this information with anyone, stating that it is meant to remain confidential until the official announcement.

Jordan is considering whether to act on this information and buy shares of the company on behalf of their clients before the announcement, believing this could be a profitable move for their portfolio. However, Jordan recalls the CFA Institute's Code of Ethics and Standards of Professional Conduct regarding the integrity of capital markets.

What should Jordan do in this scenario to maintain compliance with ethical standards related to the integrity of the capital markets?

Jordan should proceed with the trade, as the information could benefit clients and everyone else will have access to it eventually.

Jordan should refrain from trading on the information and disclose the tip to their compliance department.

Jordan should wait until the product launch is officially announced to buy shares to avoid any ethical issues.

Hint

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