Conflicts of Interest and Ethical Recommendations

Very Hard Professional Standards Application Conflicts Of Interest

As part of a financial advisory firm, you manage a significant portfolio for a high-net-worth client, Mr. Thompson. Unbeknownst to Mr. Thompson, you have a personal financial interest in a company called ABC Corp, which is a client of your firm. Recently, ABC Corp has been underperforming, and its stock price is expected to decline further. You are tasked with presenting new investment strategies to Mr. Thompson, including a recommendation to invest in ABC Corp, without disclosing your personal interests.

Which of the following actions would NOT be considered a violation of the CFA Institute's Code of Ethics regarding conflicts of interest?

Recommending that Mr. Thompson invest in ABC Corp while fully disclosing your personal financial interest.

Continuing to manage Mr. Thompson's portfolio without disclosing your interest in ABC Corp.

Recommending alternative investments to Mr. Thompson, ensuring no conflict arises with your personal interest.

Hint

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