Ethics Example

Jim Beaver, CFA, recieves a call from a client insisting he add a stock to his portfolio ASAP.

The client informs Beaver that he has obtained non-public material information, and is certain that the stock will increase substantially in the following days.

Should Beaver place the order?

Will be seen as a co conspirator

Haha, the standards are conflict with each other. I hope we don’t get anything like this on Saturday. I’d say definitly don’t take the trade. If client is an insider convince them to make information public.

On a side note, if a client straight up tells you he has insider information, he is most likely unsophisticated and doesn’t actually have insider info. Education is in order. Probably 95% of these clients with hot leads are investing in pump and dump penny stocks.

Don’t take the trade, encourage client to make information public.

Don’t do it… Held responsible for assisting in a violation.

Most Standards make you think that the client comes first but actually the order is

Integrity of capital markets > clients > employers > CFA charterholders and candidates.

Use of material nonpublic information hurts the top one.

Dont invest for client and tell wifes third cousin in India to invest in it and transfer the money in small parcels to your back account disguised as Rental Income.

If ethics was just that easy…