Responsibilities to Clients - Investment Risks

Hard Professional Standards Application Responsibilities To Clients

Samantha is a CFA charterholder working as a financial advisor for a large investment firm. One of her wealthy clients, Mr. Thompson, has expressed significant interest in an emerging technology company that has recently gone public. However, Samantha has substantial concerns regarding the company’s transparency, governance, and the potential market volatility associated with its stock. During their conversation, Mr. Thompson insists that he would like to allocate a considerable portion of his portfolio to this stock despite the risks involved.

In this situation, Samantha knows she has a duty to act in Mr. Thompson's best interests but is also aware of the importance of fully disclosing risks associated with investment choices. Considering her ethical responsibilities, how should Samantha proceed?

Proceed to create a buy order for Mr. Thompson without further discussion, as he is set on investing.

Engage Mr. Thompson in a detailed discussion about the risks and potential repercussions of investing in the stock and obtain his explicit acknowledgment.

Advise Mr. Thompson to invest only a small portion of his portfolio in the stock, while suggesting a more diversified strategy.

Hint

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