Case question about ethics and professionism

On page 35 of Book 1, Schweser Note, there is such a case MM is an analyst at DS&C, which has a significant number of HFs among its most important brokerage clients. Two trading days before the publication of the quarter-end report, MM alerts his sales force that he is about to issue a research report on WS, which will include his opinion that: 1) Qtrly rev are likely to fall short of managerment’s guidance 2) Earnings will be as much as 5 cents per share (>10%) below consensus 3) CFO is leaving This report is based on speculations rather than facts. As WS is unlikely to respond to rumors before the quarter-end, MM then releases the report to sensationalize the negative aspects to create significant downward pressure on WS’s stock to make profit on DS&C’s short positions. Therefore, MM violates II(B) and V(A). My questions are: 1) If DS&C does not have any position related to WS’s stock in its own and clients’ accounts, and the research is based on public information and professional judgement, and the publication of the report AT SUCH TIME causes WS’s stock to drop severely, should this be considered market manipulation? 2) If after WS’s stock has dropped, WS publishes a quite positive querterly report different from what MM predicted (professional judgement can also be inaccurate), did MM violate anything? Thanks a lot!

I think the key of example is there is no solid fact to support MM is opinion. It leads to the violation.

Giving advance notice of an upcoming report (a CFAI no-no) to the sales force (another no-no) which will encourage hedge funds to short the stock, hopefully through you so that you make commissions. After it goes down, the HF’s will cover their positions and buy in extra so that when the positive report comes in, they (and you) make money on the way back up too. And, you’re asking if there’s anything unethical about that? It’s one thing to predict another company’s report or analyst consensus, but it seems to me that you are suggesting something else…