John's Ethical Dilemma with a Familial Connection

Medium Professional Standards Application Conflicts Of Interest

John is a Chartered Financial Analyst (CFA) and works as a portfolio manager for a large investment firm. He recently learned that his cousin is the president of a company whose stock is not yet publicly traded but has plans for an IPO in the near future. John feels this could be a lucrative investment opportunity and contemplates purchasing shares of this company upon its market debut. However, he is aware that the CFA Institute’s Code of Ethics emphasizes the importance of avoiding conflicts of interest.

During a discussion with his colleague, Sarah, John mentions his intentions to invest in the company but does not disclose his familial connection to the president. Sarah, unaware of John's conflict of interest, suggests that investing in the company might be a good idea based on her analyses. John now faces a dilemma regarding how to proceed without violating ethical standards.

What is the most appropriate course of action for John to take in this situation?

John should refrain from investing in the company and disclose his familial relationship to his colleagues.

John can proceed to invest in the company without disclosing his relationship since it is a personal investment.

John should inform his supervisor about his potential investment but not mention his familial relationship.

Hint

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