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Disclosure of conflicts to clients
#analyst-notes #and-actions #code-of-ethics-and-standards-of-professional-conduct #vi-conflicts-of-interest
Example 1

Failure to disclose a performance-based bonus plan: A manager gets a bonus from her employer based on the performance of the pension accounts she manages. One of her clients asks her why his pension plan seems to be weighted in favor of high beta stocks. She says nothing about the bonus plan.

Example 2

You manage the pension fund for the Tremont Corporation. Huntington Biomedical is one of the largest holdings in the fund. You also serve on the board of directors for Huntington. You must disclose this relationship. While it is not unethical to have a responsibility to the fund's beneficiaries and to the shareholders of Huntington, you must make sure that the fund's board is aware of your other appointment.

Consider the same scenario, but instead of being on Huntington's board, you own a significant block of Huntington stock. You must disclose this beneficial ownership too. As long as you do not violate other standards regarding Priority of Transactions or Fair Dealing, disclosure of your holdings will be sufficient to meet this standard.

Example 3

An analyst recommends a stock. However, he fails to disclose that he is on the company's board or that he has inherited a sizable amount of the stock, or that his wife owns 20% of the company. The standard is violated by the analyst's failure to disclose his beneficiary interest in the recommended company.

Example 4

Company XYZ is considering hiring John to manage its pension fund. XYZ asks John to vote the XYZ stock proxies held in other accounts he manages in favor of XYZ's management. John will violate the standard if he accepts XYZ's offer. He should vote the proxies in the best interest of his clients.
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