Investment Decision with Family Connection

Very Hard Professional Standards Application Responsibilities To Clients

As a CFA charterholder working as a portfolio manager, you receive a proposal from a local startup seeking investment. The startup is owned by your cousin, who is not aware of your professional role. The proposed investment would require a significant portion of your clients' funds. You have previously advised your clients against investing in startups due to their high-risk nature, but you believe in your cousin's business idea. What should you do according to the CFA Institute's Code of Ethics and Standards of Professional Conduct regarding your responsibilities to your clients?

Discuss the opportunity with your clients, highlighting your personal connection, and allow them to decide whether to invest.

Decline to consider the investment opportunity due to your personal relationship to avoid any potential conflict of interest.

Seek permission from your clients to invest in the startup using their funds, disclosing the familial connection and the risks involved.

Hint

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