Fair. I don't know what the legality is in every jurisdiction and it may very well be legal everywhere so I'll clarify. It is highly frowned upon, and potentially unethical, for doctors to treat their family or prescribe medication for themselves or their family. This most certainly extends to non-family members if a conflict of interest exists. It would be unethical if you prescribed medication to your bookie.

Anyway, my point stands regardless. The fact that there may be no strict illegality in a school or faculty investing in student project, does not mean there are no ethical issues that have to be resolved. Furthermore, the faculty or school may be opening itself up to liability. Frequently these kinds of issues are not judged (in civil court at least) strictly on their legality but rather on the 'smell test'. I can imagine a scenario in which a student may sue the school alleging some negative repercussions in his school life given that the investment fell through (maybe sue the school for tuition fees he paid prior to being 'pressured' to quit school). The case may be merit-less, but the school could be punished for putting themselves in a position in which a conflict of interest exists. When a business blows-up there are a lot of hurt feelings and a lot of anger and bitterness.