Handling Conflicts of Interest When Personal Relationships Are Involved

Very Hard Cfa Institute Code And Standards Employer Duties - Loyalty

As a financial analyst at a hedge fund, you have been tasked with managing a portfolio of high-net-worth clients. During a recent meeting, your manager informs you that the firm has been approached by a private equity fund that is seeking to raise capital for a new investment vehicle focused on distressed assets. Your manager expresses interest in investing a significant portion of the hedge fund's capital in this opportunity, which means that your firm's performance may be tied to the success of this private equity fund.

However, you discover that one of your personal acquaintances is one of the principals at the private equity fund, and you are aware they might be offering you favorable investment opportunities specifically within that fund. Given your professional duties and the CFA Institute's Code of Ethics and Standards of Professional Conduct, what should you do in this situation?

Proceed with the investment, ensuring that any communication regarding the investment is disclosed to your manager.

Decline to recommend the investment and inform your manager about your acquaintance’s involvement to mitigate any potential conflict of interest.

Invest personally in the private equity fund before making any recommendations to your firm, as it could provide better insight into the fund's performance.

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