The Glenarm Company

The Glenarm Company

Case Facts

Peter Sherman, CFA, recently joined the Glenarm Company after five years at Pearl Investment Management. He is very excited about the new job and believes he will make a big contribution to Glenarm. His first task is to identify attractive Latin American companies for Glenarm's emerging markets portfolio. Sherman, knowing many of these companies through his consulting contacts, approaches the task enthusiastically. He believes the Glenarm Company will clearly benefit from his knowledge about these companies and has no need to know about his consulting on the side.

Sherman's Background. Sherman had joined Pearl Investment Management, a small equityoriented firm, as a junior research analyst. Pearl entered the international investing arena shortly after Sherman arrived, and Sherman performed well as he gained experience, particularly in researching emerging market securities. Sherman also spent some time handling client relations in the account administration department. More than a year ago, Sherman had earned his CFA designation.

Sherman's role at Pearl grew when several of his boss’s foreign investment banking contacts hired Pearl to research companies and industries in Latin America in order to better position themselves vis-à-vis their local competitors. When Pearl expanded its research department to accommodate these new projects, the company made Sherman its primary analyst for emerging markets. The firm encouraged Sherman to develop expertise in this area, and he capitalized on his position by serving as a consultant to several third-world companies to assist them in attracting U.S. and European investors, an arrangement that Sherman fully disclosed to Pearl. Pearl did not own stock in any of the companies that Sherman consulted with.

Shortly after Sherman's research responsibilities at Pearl expanded, he received a call from John Lawrence, an acquaintance in the local CFA Institute financial...