John's Conflict of Interest Evaluation

Very Hard Professional Standards Application Conflicts Of Interest

John is a portfolio manager at Global Investments, a large asset management firm. Recently, he has been faced with a challenging ethical dilemma. John is also on the board of directors for Tech Innovations, a company whose stock he is currently recommending to his clients. He knows that his recommendations could positively influence the stock price, and he personally stands to gain if the stock performs well as a shareholder of Tech Innovations.

During a client presentation, John does not disclose his board position or his personal investment in Tech Innovations, instead focusing solely on the company's financial performance and growth prospects. One of his clients asks about potential conflicts of interest. John reassures them that he only acts in their best interest and that his decisions are based fully on merit.

Which of the following best describes John's actions regarding the ethical considerations of conflicts of interest?

John has appropriately managed the conflict of interest by relying on the firm’s compliance department to disclose his external position.

John has violated the CFA Institute's Code of Ethics and Standards of Professional Conduct by failing to disclose his board position in Tech Innovations, which represents a conflict of interest.

John's actions are justified because he genuinely believes the stock is a good investment regardless of his personal interests.

Hint

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