A star Manager conflicted. What should we do?

It has come to our notice that one of our best managers – a Sales Manager is involved in doing business related to the company he works for. Even when the appointment letter does not restrict him, other policy documents like the “Conflict of Interest” policy do.

Do we put him on disciplinary action?
Do we fire him?
Should we instead tighten our internal controls so we minimize potential losses?
What could we have done wrong?

We looking at the investment we have made toward this manager and its disturbing to just let go.

Look forward to your comments and advice.

Worried GM