Ethical Decision-Making in Client Confidentiality

Very Hard Professional Standards Application Ethical Decision-making

Samantha is a CFA charterholder working as a portfolio manager at a hedge fund. She has developed a strong relationship with a high-net-worth client, Mr. Alvarez, who has been investing with her for several years. During a recent business trip, Mr. Alvarez shares confidential information about his personal finances, indicating that he may need to liquidate a significant portion of his investment to meet urgent cash flow needs.

Samantha is faced with a dilemma: the hedge fund is currently considering acquiring a substantial stake in a company that Mr. Alvarez has heavily invested in. She knows that if Mr. Alvarez sells, it might negatively impact the stock price of that company. Samantha is torn between maintaining her duty to act in the best interest of her client and her obligation to the potential investment strategy of the hedge fund.

The CFA Institute's Code of Ethics and Standards of Professional Conduct requires that members always act competently and ethically in their professional activities. Given this situation, what should Samantha prioritize in her decision-making?

Prioritize Mr. Alvarez’s confidentiality and decide not to disclose his financial situation to anyone at the hedge fund.

Inform the hedge fund team about Mr. Alvarez’s financial status, as it is relevant to the investment opportunity.

Advise Mr. Alvarez to delay his decision on liquidation until after the hedge fund completes its investment analysis.

Hint

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