Here is a  case study from John Harbour, an ethics instructor with IMCA and a wealth manager at Morgan Stanley Smith Barney, about an advisor who has to walk a tightrope between two of his clients:

Your client of many years (Harbour calls this client S. Lagree) trusts you implicitly. After a recent quarterly performance review meeting, Lagree tells you, his advisor, about his plans for a hostile takeover of a competing firm. He intends to “buy” the clients of the firm, replace the products with those of his current company and fire the employees. There are significant questions about the legal methods and Lagree confirms that he intends to bend the rules.

You, the advisor, realize that the chief executive officer of the firm targeted by Lagree is also one of your clients. What do you do?

First, this sounds like the right time to confer with compliance. Harbour notes that you (as the advisor) have as fiduciary duty to both clients. You, at least can tell Lagree that you don’t agree with his methods. But, client confidentiality is a factor as well.

So, I ask, what do you think is the right course of action?

But Harbour also says that you should take a close look at your client and ask yourself this: Do you have clients who bend the rules? If so, it may be time for a housecleaning. That will preserve your integrity and your firm’s as well.


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