By default Internet Explorer/Options/Security only has 4 security zones.

There is an additional zone "My Computer" that can be made visible via the following registry edit.

HKEY_CURRENT_USER\SOFTWARE\Microsoft\Windows\CurrentVersion\Internet Settings\Zones\0

Find the key for FLAGS and set the value to "47" hex  (it will be at 21 by default)

Now the new zone will be available, edit its custom settings and find the entry for:

Web sites in less privileged zones may navigate .....and set this to either Prompt to Enable.

Links form HTTP:// protocol to FILE:// protocol will now work and thus links to FILES in the Factonomy portfolio application will function as desired.