IBBC CAPITAL ACADEMY / 2027
Avoid conflicts where possible and disclose the rest clearly
Independent IBBC Capital draft content for self-study. Not affiliated with or endorsed by CFA Institute. New lessons await subject-matter review. No CFA designation or official PSM credit is awarded.
Learning goals
- Diagnose the conduct from the facts and relevant professional duties.
- Recommend a documented preventive and corrective response.
Draft · approximately 60 minutes, excluding further revision.
Decision case · fictional facts
A fictional portfolio manager recommends an issuer in which her spouse holds a large stake. She plans a personal purchase before executing suitable client orders and receives a referral fee from a platform, disclosed only after clients sign. A supervisor says disclosure alone permits front-running.
Duties and competing interests
Avoid conflicts that could impair independence and objectivity where reasonably possible; otherwise make full, fair, prominent and understandable disclosure to affected parties. Include relevant beneficial interests and incentives, not only holdings in the analyst’s own name. Disclosure informs judgment but is not permission for otherwise prohibited behavior.
Client and employer transactions take priority over personal transactions in which the professional is a beneficial owner, subject to the applicable rules and fair allocation. Referral compensation must be disclosed appropriately before a client enters a service agreement so the client can assess incentives and costs. Controls should address preclearance, restricted periods, beneficial ownership and payment records.
Decision, controls and remaining uncertainty
Defer the personal trade, execute client orders under the fair policy and refer the proposed conflict to compliance. Disclose the spouse’s material interest and evaluate whether recusal or other avoidance is necessary.
Provide clear referral-fee terms before agreement and correct the late disclosure. Document approvals and monitoring; consent does not legitimize using client information to trade ahead.
Formula and assumptions
Identify facts → duties → affected parties → feasible action → evidence and follow-up
Compare with the model response after drafting
- Defer the personal trade, execute client orders under the fair policy and refer the proposed conflict to compliance. Disclose the spouse’s material interest and evaluate whether recusal or other avoidance is necessary.
- Provide clear referral-fee terms before agreement and correct the late disclosure. Document approvals and monitoring; consent does not legitimize using client information to trade ahead.
Errors to catch
- Treating disclosure, client consent or a supervisor’s instruction as permission for prohibited conduct.
- Inventing missing facts or treating a potential concern as a proven legal violation.
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Sources and coverage status
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