Schweser ethics confusion
Hi, there is a question/solution in the Ethics section that has me confused. I thought the answer would surely be “Material Nonpublic Information,” but the solution says that it is “Loyalty.” The solution explanation says that he expresses his analysis on his blog before telling it to his employer, but the question content doesn’t make that clear, IMO. I’ve looked up the question and it seems like in previous versions of Schweser’s program, they had similar questions and solutions where the answer was, in fact, “Material Nonpublic Information.”
Can someone please help me in explaining why it’s not II(A)?
Michael Malone, CFA, is an investment analyst for a large brokerage firm in New York who covers the airlines industry. After hours in his personal time, Malone maintains an online blog on which he expresses his personal opinions about various investment opportunities, including, but not limited to, the airlines industry. On his blog, he posts a very negative investment opinion about WestAir stock. Malone knows that WestAir’s stock will be downgraded to a “sell” by his firm next week. Malone has most likely violated:
A) violated Standard IV(A) Loyalty.
B) Standard VI(B) Priority of Transactions.
C) violated Standard II(A) Material Nonpublic Information.
By expressing his investment analysis on his personal blog ahead of his employer, Malone deprived his employer of the benefits of his skills and abilities and therefore violated Standard IV(A) Loyalty. Malone did not possess material nonpublic information about WestAir and no transactions have taken place.
(Study Session 1, Module 2.1, LOS 2.c)
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