Question

Conflict of Interest: Luca Deporte is the Senior Portfolio Strategist for the Republic of Benga’s sovereign wealth fund - The Zouk Fund. The fund employs external specialist asset managers to manage various portions of the Zouk fund mandate in the category of developed market equity. Earlier in the week Luca received a phone call from Alex, a former colleague from Business School. Alex is now a sell-side analyst with a reputable major North American asset management firm and is in the process of expanding his clientele and is keen on landing the Zouk fund as a potential lucrative client. During his conversation with Luca, Alex introduces the products and services available and the prospect of gaining a share of the externally managed portfolios. The sales call is timely as Luca was already evaluating existing and potential managers for the developed market equity portion of the fund. Further, Luca’s research reveals that Alex’s employer’s products are generally aligned with the Zouk fund’s mandate. Luca decides to give Alex a chance and includes Alex’s firm as a recommended external manager for the developed market equity. However the report does not mention his familiarity with the sales analyst-Alex. Consider the Following questions in your post \

1. What is an ethical dilemma in this case?
2. What are the employer’s duties?
3. In an effort to avoid conflict the employer can find alternative solutions, which can be reconsidered, and new alternative solutions.                                                                                                      
4. What action do you think is required by Luca if any? In a response no of between 250-300 words indicate how you would have approached this dilemma differently from an ethical perspective. What would your actions be as the employee? What standards would you use? K

Answer 1

Ans 1: The ethical dilemma in the case is the dilemma being faced by Luca. Alex was a friend of Luca. And Luca was providing a chance to Alex's employer to become external manager for developed equity market. The dilemma is that Alex was a former colleague from Business School. The familiarity with the person to whom the recommendation for business is given is a dilemma situation though the products are aligned with Luca's fund management products.

Ans2: The employer's duties involves designing a proper policy. The policy should include the familiarity aspects with the stakeholders involved. The policy should clearly mention the guidelines to recommend a person as external manager for the fund, the eligibility criteria for employment and providing business.

Ans 3: To avoid conflicting solution the employer can prepare a draft of guideline to provide clear instruction to the employees to be followed in the business. Luca was honest and sincere towards the business, the dilemma was present due to the familiarity with the person with whom the business is dealt with. The only professional way of solving is to prepare a policy and motivate people to follow it.

Ans 4: Luca should keep her employers in loop while recommending Alex's employer as external manager that Alex was her colleague in Business School. This transparency will reduce the dilemma. She can explain the benefit of the products and service of Alex's to her employer. The logic of the benefit to Lucas firm should clearly come out in the rationale provided in Luca's explanation for recommendint Alex's firms name. Familiary should not be shown as the reason for recommending Alex's firm name as that was not the reason.