A member fails to disclose ownership in a client’s company when making recommendations. Violation?

• A. Standard II.A Material Nonpublic Information
• B. Standard VI.A Disclosure of Conflicts
• C. Standard IV.D Performance Presentation
• D. Standard I.C Misrepresentation

Answer: (B)

Ownership in a client's company creates a conflict of interest that must be disclosed to the client before making recommendations. The CFA Institute’s Standard VI.A requires that any conflicts of interest be disclosed so the client can judge whether the recommendations may be biased. By not disclosing this ownership, the member undermines the client’s ability to assess potential bias and fails to meet the obligation to act with transparency and integrity in fiduciary relationships.

The other standards don’t fit this situation as cleanly: material nonpublic information concerns trading on inside information, not conflicts from personal financial interests; performance presentation focuses on how results are shown rather than conflicts; misrepresentation deals with false or misleading statements, not simply failing to disclose a conflict.