Chartered Investment Manager (CIM) Practice Exam · Question
A portfolio manager identifies a material conflict of interest. What is the most appropriate action to take under their fiduciary duty?
Under fiduciary duty, investment professionals are required to always act in the client's best interest. When a conflict of interest arises, the manager must ei
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Question: A portfolio manager identifies a material conflict of interest. What is the most appropriate action to take under their fiduciary duty?
Answer options:
- Ignore the conflict if it benefits the manager only slightly. ✅ Disclose the conflict to the client and obtain informed consent, or avoid the conflict.
- Proceed with the transaction as long as it's legal, without explicit disclosure.
- Delegate the decision to a junior member of the team.
Correct answer: Disclose the conflict to the client and obtain informed consent, or avoid the conflict.
Explanation: Under fiduciary duty, investment professionals are required to always act in the client's best interest. When a conflict of interest arises, the manager must either avoid it entirely or fully disclose it to the client and obtain their informed consent before proceeding.
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