Resolve overlapping ethical issues in one investment decision

Learning goals

• Which action best addresses the central case issues?
• Explain why not take priority or disadvantage the client applies to this case.
• Identify the case-specific assumption or failure mode before taking action.

Draft · approximately 30 minutes, excluding further revision.

Shared case and decision context

A manager has an unexecuted suitable client order. A broker offers a personal reward for routing it, and the manager considers buying first in a personal account. A sales report claims the proposed trade is risk-free although a vendor-model assumption has not been checked.

Economic or professional mechanism

A fact pattern can trigger multiple independent duties: client priority, conflict management, diligent analysis and truthful communication. Resolving one issue does not cure another. A suitable trade can still be improperly routed, front-run or misrepresented. Start with the affected client, pending action and actual incentive rather than guessing a single standard from a keyword.

Apply, challenge and communicate

Give the client order priority, reject or appropriately resolve the conflicted reward and validate the model. Correct the risk-free claim before communicating. Record the rationale, controls and any escalation; personal preclearance does not justify disadvantaging a pending client trade. Disclosure alone cannot authorize front-running.

Formula and assumptions

Address every applicable duty; client priority+conflict control+reasonable basis+truthful communication

Case analysis with explicit assumptions

1. A manager has an unexecuted suitable client order. A broker offers a personal reward for routing it, and the manager considers buying first in a personal account. A sales report claims the proposed trade is risk-free although a vendor-model assumption has not been checked.
2. Method: Address every applicable duty; client priority+conflict control+reasonable basis+truthful communication
3. Case result: Prioritize the client and resolve the reward, model and communication issues. Give the client order priority, reject or appropriately resolve the conflicted reward and validate the model. Correct the risk-free claim before communicating. Record the rationale, controls and any escalation; personal preclearance does not justify disadvantaging a pending client trade. Disclosure alone cannot authorize front-running.

Errors to catch

• Do not replace the stated assumptions with an unstated shortcut. Reconcile units, timing and the claim being valued or duty being assessed.
• Only the most convenient standard label is not a defensible conclusion for these case facts.

Original knowledge check

Answer every question before checking. Review explanations after submitting; retry starts a new attempt.

Sources and coverage status

These original lessons are drafts. Public outlines are used to check scope; the official learning-outcome text and proprietary question banks are not reproduced here. Follow the source for exam-year requirements and updates.

• Reference · www.cfainstitute.org
• Reference · www.cfainstitute.org