Ethical Investment Analysis Diligence Scenario

Very Hard Cfa Institute Code And Standards Investment Analysis - Diligence

James is a CFA charterholder and an investment analyst at a reputable investment management firm. He is currently analyzing a pharmaceutical company that is on the verge of releasing a groundbreaking medication. During his research, he discovers that the company's latest clinical trial results are more favorable than what has been publicly disclosed, due to an impending merger that is expected to increase drug approval rates.

James is excited about the potential profitability of this information and is considering recommending an investment in the company to his clients. However, he is aware that the information he possesses is non-public and may not be legally tradeable.

Which of the following actions would best align with the CFA Institute Code of Ethics and Standards of Professional Conduct in regard to diligence in investment analysis?

Immediately recommend the investment to clients to capitalize on the information before it becomes public.

Further investigate the drug trial’s results and the implications of the merger before making any recommendations to clients.

Wait for the company to release the information publicly and then communicate the potential investment opportunity.

Hint

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