Financial Risk Manager Part 1
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Paul Lambert, FRM, serves as a financial analyst for Lakeside Investments. He has been tasked with preparing a purchase recommendation on Brighter World Limited. Which of the following statements about disclosure of conflicts of interest would Lambert have to disclose fully?
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A
He co-owns 30,000 of Brighter World Limited with his brother.
B
He has a significant ownership in Brighter World Limited through a family trust.
C
Lakeside is an over-the-counter market maker for Brighter World Limited's stock.
D
All of the above.
Explanation:
Explanation
According to the GARP Code of Conduct, members are required to make full and fair disclosure of all matters that could reasonably be expected to impair their objectivity and independence or interfere with their respective duties to their employers, clients, and prospective clients. This includes all the scenarios mentioned in the options.
Option A: Lambert co-owns 30,000 shares of Brighter World Limited with his brother. This personal investment could potentially influence his analysis and recommendations, thereby creating a conflict of interest.
Option B: Lambert has a significant ownership in Brighter World Limited through a family trust. Again, this personal stake could bias his analysis and recommendations, leading to a conflict of interest.
Option C: Lakeside Investments, Lambert's employer, is an over-the-counter market maker for Brighter World Limited's stock. This means that Lakeside Investments could potentially influence the price of Brighter World Limited's stock, which again could create a conflict of interest for Lambert.
Therefore, in all these scenarios, Lambert would be required to make a full and comprehensive disclosure of potential conflicts of interest, as per the GARP Code of Conduct.
Note: The text incorrectly states that "Choice A is incorrect" in the explanation, but this contradicts the overall correct answer being D. The correct interpretation is that ALL options represent situations requiring disclosure.
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