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CFA Level I · CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

A portfolio manager owns shares in a company that she recommends to clients. According to the guidance for Standard VI(A), she most likely must:

She must disclose her beneficial ownership interest in the shares she recommends. The guidance identifies stock ownership as the most prevalent conflict requiring disclosure. Banning ownership is the simplest prevention method but may be overly burdensome and too restrictive, so selling is not required.

  1. Asell the shares before issuing the recommendation
  2. Bdisclose her beneficial ownership interest in the sharesCorrect
  3. Cobtain the issuer's approval for holding the shares

Explanation

The guidance calls stock ownership in recommended companies the most prevalent conflict requiring disclosure and says members must disclose any beneficial ownership interest in securities they recommend. Prohibiting ownership is a simple method but may be overly burdensome and restrictive, so it is not required.

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