A portfolio manager advises a client to purchase shares of a company in which the manager holds a significant personal interest, without disclosing this interest to the client. This situation most directly violates which regulatory principle?

Question: A portfolio manager advises a client to purchase shares of a company in which the manager holds a significant personal interest, without disclosing this interest to the client. This situation most directly violates which regulatory principle?

Answer options: ✅ Conflict of interest rules

• Client confidentiality
• Insider trading rules
• Anti-money laundering regulations

Correct answer: Conflict of interest rules

Explanation: Failing to disclose a personal interest when giving investment advice creates a conflict of interest, as the manager's personal gain could potentially outweigh the client's best interest. Such conflicts must be avoided or disclosed and addressed.