Managing Conflicts of Interest in Investment Decisions

Hard Professional Standards Application Conflicts Of Interest

As a portfolio manager at a renowned investment firm, Lisa is responsible for managing a diverse set of funds for her clients. Recently, she was approached by a company where her brother holds a senior executive role, seeking potential investment from her funds. Lisa considers the company a viable investment and is contemplating including it in her portfolio, believing it would benefit her clients.

However, Lisa is aware that this relationship could create a potential conflict of interest. According to the CFA Institute's Code of Ethics and Standards of Professional Conduct, how should Lisa proceed to adhere to ethical standards in this situation?

Lisa should proceed with the investment without disclosure, as the company is a good investment opportunity.

Lisa must inform her compliance department and disclose the relationship to her clients prior to making the investment.

Lisa can invest in the company but must ensure her brother does not gain financially from the investment.

Hint

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