Investment Decisions and Conflicts of Interest

Hard Cfa Institute Code And Standards Duties - Loyalty And Care

As a portfolio manager at a large investment firm, you are responsible for selecting investments on behalf of your clients. Recently, you are approached by a long-time friend who works for a startup seeking capital. The company operates in a sector you are enthusiastic about, and you believe it has high potential for growth. However, you know investing in this startup could create a conflict of interest due to your personal relationship with the founder. You are considering investing a portion of your clients' funds in this startup, citing a belief in its potential.

What is the most appropriate action you should take in this situation according to the CFA Institute's Code of Ethics and Standards of Professional Conduct regarding loyalty and care?

Invest in the startup using your clients' funds, as your belief in its growth justifies the investment.

Disclose your relationship to the firm’s compliance department and seek their guidance before considering any investment.

Not pursue the investment and advise your friend to seek funding from other sources.

Hint

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