When an analyst follwing company A, and his wife is working or a board memeber for Co.A. The analyst want to purchase a stock for himself in that company. Is it acceptable if he disclosed the matter?
Ownership of stocks analyzed or recommended, participation on outside boards, and financial or other pressures that could influence a decision are to be promptly reported to the employer so that their impact can be assessed and a decision on how to resolve the conflict can be made.
CFA, Level II, Book 1, page ~149-150
I’m not sure whether her wife’s position on board is to be disclosed, but the ownership of the stock is certainly to be disclosed. For the wife’s position on the board, I think the analyst is better to disclose to err on the side of caution, since the textbook says the following:
In making and updating disclosures of conflicts of interest, members and candidates should err on the side of caution to ensure that conflicts are effectively communicated.
But there is no reason to refrain from buying the stock, right, he just needs to disclose?
No, I see there is no reason for him to refrain from buying the stock, he can do so after proper disclosures
I’m not sure whether the right time of disclosing the ownership is before the acquisition of after, but I don’t see any reason not to acquire the stocks. Prohibition of owning stock will be a discrimination towards the analyst. Since the analyst is covering that particular company, I guess, he is better to disclose to his employee which will reassign the task of covering that company to other analyst, after which the analyst can buy the stocks without creating a conflict of interest. Curriculum says that the easiest method for preventing a conflict is to prohibit members and candidates from owning any such securities, but this approach is overly burdensome and discriminates against members and candidates.