Ethics question - material nonpublic information

CFA Level III
#1

I’d like to verify if my understanding is right.

A CFO has some material nonpublic information regarding his company that would definitely impact the stock price positively if it came out. He shares it with his wife and his golfing buddy and all of them are covered persons. The golfing buddy buys the stock before the information is made public. In this case:

The golfing buddy is in violation of the standard because he acted on the information.

The wife is not, because she only possesses the information, but did not act on it.

The CFO is not, because gave the information to someone else but did not act on it for personal benefit.

Is that right? Especially regarding the CFO? Or is the CFO in violation?

#2

The CFO is likely also in violation; you are not allowed to act or cause others to act on material, nonpublic information. CFA Institute takes the view that _ if you could reasonably expect someone else to act _ (he knew that his golfing buddy is an investor, maybe he’s greedy, whatever), that’s a violation, even if you didn’t strictly participate in the action itself.

#3

Thanks S2000. It is definitely nuances like this that trip me up, though I consider myself fairly ethical. Hence an ethics question at Level III when I’ve studied this material for the third time.

#4

My pleasure.