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FRM Part I · FRM Exam Part I · GARP Code of Conduct

An FRM holder serves on a bank's credit committee and learns that a close relative owns a company applying for a large loan from the bank. Which action best aligns with the GARP Code of Conduct on conflicts of interest?

He should disclose the relationship to the appropriate parties and recuse himself from the decision. The GARP Code requires members to disclose conflicts of interest and avoid situations that could impair objectivity, and personal diary notes or silence do not satisfy that duty.

  1. AVote on the loan but record the family relationship in a personal diary
  2. BVote on the loan only if the terms are market-based
  3. CDisclose the relationship to the appropriate parties and recuse himself from the decisionCorrect
  4. DSay nothing, because the relative is not a client of the member personally

Explanation

The Code requires members to disclose actual or potential conflicts of interest and to avoid them where they could compromise objectivity. Disclosure and recusal addresses the conflict. Voting on market terms or staying silent still leaves the conflict undisclosed or unmanaged.

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