Rose Brown, CFA, is a highly regarded portfolio manager for Ames Advisors (AA), a mid-sized mutual fund firm investing in domestic securities. She has watched the hedge fund boom and on numerous occasions suggested that her firm create such a fund. Senior management has refused to commit resources to the area. Attracted by potential higher fees associated with hedge funds, Brown and several other employees organize a hedge fund to invest in international securities. Brown is careful to work on the fund development only on her own time. Because AA management thinks hedge funds are a fad, she does not inform her supervisor about the hedge fund creation. According to the Standards of Practice Handbook, Brown should most likely address which of the standards immediately?

Explanation: According to Standard VI (A) Disclosure of Conflicts, Brown should disclose to her employer the fact she is developing a hedge fund that could possibly interfere with her responsibilities at AA. In setting up a new fund, Brown is not acting for the benefit of her employer. She should have informed AA that she wanted to organize a hedge fund and come to some mutual agreement on how this would occur.