NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
Mr. Raghavan, an investment adviser, receives a gift of expensive foreign holiday tickets from a mutual fund house whose scheme he is considering recommending to clients. What is the most appropriate ethical response?
He should decline the gift, or at least disclose it and manage the conflict. A valuable gift from a product provider threatens objectivity and independence, which advisers must protect to ensure recommendations serve the client's interest alone.
- AAccept the gift, since the recommendation will still be based on his judgement
- BAccept the gift and disclose it only if a client asks
- CAccept the gift and recommend only that fund house's schemes to stay consistent
- DDecline the gift or disclose it, as it creates a conflict of interest that could impair objectivityCorrect
Explanation
Valuable gifts from product providers can compromise independence and objectivity. The adviser should decline them or at minimum disclose and manage the conflict. Accepting and relying on personal judgement or disclosing only on request does not adequately address the conflict.
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