Professionalism and Ethical Decision-Making in Investment Management

Very Hard Ethical Decision-making Professionalism

Emma is a Chartered Financial Analyst (CFA) working as the Chief Investment Officer at a successful asset management firm. One of her firm's institutional clients has raised concerns about a long-held investment in a company that has been facing increasing regulatory scrutiny. Emma is aware that selling the investment could trigger significant losses, which would affect her firm's performance metrics and, consequently, her compensation. She also realizes that failing to act could jeopardize her client's capital.

During a meeting with her colleagues, Emma discusses potential strategies to address the client's concerns. One colleague suggests using aggressive marketing tactics to downplay the regulatory issues, while another proposes reassessing the investment from a risk-reward perspective. Emma is torn between the potential financial impact of selling the investment and her fiduciary duty to act in the best interest of her client.

In light of the CFA Institute's Code of Ethics and Standards of Professional Conduct, what course of action should Emma take to uphold her professionalism?

Sell the investment immediately to mitigate potential losses, despite the regulatory issues being unfounded.

Reassess the risk-reward profile of the investment and communicate transparently with the client about the current situation.

Implement the aggressive marketing tactics suggested by her colleague to maintain the investment's value.

Hint

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