NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
An investment adviser registered with SEBI receives a gift voucher of high value from a product manufacturer whose scheme the adviser has been recommending to clients. Which course of action best reflects ethical conduct?
The adviser should decline the gift, or at least disclose it and manage the conflict, because a valuable gift from a product manufacturer can compromise the objectivity of advice. Ethical conduct requires avoiding or transparently handling conflicts of interest, not hiding them or acting on them selectively.
- AAccept it quietly because the clients are not harmed if the scheme is suitable
- BAccept it and disclose it to clients only if they ask
- CDecline it, or disclose it and manage the conflict of interest so that advice stays objectiveCorrect
- DAccept it and recommend the scheme only to clients who have not yet invested in it
Explanation
Ethical standards require advisers to avoid or properly manage conflicts of interest that could impair objectivity. A valuable gift from a manufacturer creates such a conflict. Quiet acceptance or disclosure only on request does not manage the conflict, and selective recommending still lets the gift influence advice.
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