Evaluating Conflict of Interest in Client Recommendations

As a financial analyst at a prominent investment firm, you are approached by a long-time client who is interested in investing a significant sum of money into a new venture capital fund. This fund is managed by a close friend of yours, who has recently become a key figure in the financial community. Although you believe the fund could be a good opportunity for your client, you also recognize that your personal relationship with the fund manager may create a conflict of interest.

Considering the ethical responsibilities outlined in the CFA Institute's Code of Ethics and Standards of Professional Conduct, evaluate the steps you should take in this situation before making a recommendation to your client. Provide specific rationale for your decisions and discuss how you would disclose the potential conflict of interest to your client.