Managing Conflicts of Interest in Client Relations

Hard Professional Standards Application Conflicts Of Interest

Michael is a senior portfolio manager at XYZ Asset Management. He has been approached by a former colleague, Sarah, who is now the head of investor relations at a biotechnology company, Biotech Corp. Sarah asks Michael for a recommendation regarding the company's stock before its upcoming earnings report, expressing her desire to attract more institutional investors.

Michael is aware that Biotech Corp is considering a strategic partnership that could positively influence its stock price, but he does not have any non-public information about the company. However, he values his personal relationship with Sarah and feels a sense of loyalty to her. Additionally, he has been under pressure from his firm to generate higher returns for their clients.

What should Michael do next in this situation?

Michael should provide Sarah with his honest assessment of Biotech Corp's stock without disclosing any proprietary information.

Michael should decline to give Sarah his opinion on Biotech Corp to avoid any appearance of a conflict of interest.

Michael should research Biotech Corp thoroughly and offer a formal recommendation to Sarah, as long as he doesn’t disclose any insider information.

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