Ethical Dilemma of Insider Information Usage

John Smith is a portfolio manager at a well-known investment firm. He has recently published a research report recommending the purchase of stock in Company Y, a tech firm focused on renewable energy. John has been approached by a friend who works at Company Y, who has disclosed confidential information about an upcoming product launch that is expected to significantly boost the company’s stock price. John is aware that using this information in his investment analysis could result in substantial profits but also raises ethical concerns regarding insider trading and his duty to clients.

As John contemplates his next steps, he considers his responsibility to act in the best interest of his clients, the integrity of the investment process, and the impact of his actions on market fairness.

Discuss the ethical implications of John's situation. How should he proceed to ensure compliance with ethical standards while maximizing value for his clients? Provide a detailed analysis, including references to relevant CFA Institute Code of Ethics and Standards of Professional Conduct.