FRM Part I · FRM Exam Part I · GARP Code of Conduct
A risk analyst at a bank learns that her spouse owns a significant shareholding in a company whose credit limit she is about to review. Under the GARP Code of Conduct, what is the most appropriate action?
She should disclose the relationship to her employer and step away from the review or seek guidance first. The GARP Code requires members to disclose potential conflicts so objectivity is protected. A private note or a cautious decision does not remove the conflict.
- AProceed with the review but record the shareholding in her personal files
- BDisclose the relationship to her employer and recuse herself or seek guidance before actingCorrect
- CApprove the limit only if it is equal to or lower than the existing limit
- DSay nothing, because a spouse's holding is not the analyst's own interest
Explanation
The Code requires members to disclose actual or potential conflicts of interest to their employer and affected parties. Keeping a private note is not disclosure. Limiting the outcome to a lower limit does not remove the conflict. A spouse's holding can still impair objectivity, so silence is wrong.
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