Restricting the trade or causing others to restrict on the trade based on the material non public information is a violation of material non public information because of the obligation to integrity of financial markets. Let’s say you have a client who owns the stock of company X and you are responsible to manage his portfolio. Somehow You got hold of material non public information regarding this company through which you can derive a conclusion that prices of the X’ stock are going to come down in the future, and chances of this information being disseminated in the public are very unlikely, including your own efforts to persuade the company’s authority to make this information public. If you sell the stocks, you are definitely violating the standards of material non public information, nonetheless if you act on this information and keep it, you are not acting in the best interest of clients. What do you(as an analyst) do in this case?
I believe the standard for material non public information takes precedence.
It’s not close, you can’t trade on MNPI though it would usually be in your client’s financial interest to do so. Most MNPI is about the stock going up not down (tender offers, etc). If you have MNPI that says a stock is going down (e.g., their oil rig is on fire and they havent told anyone about it yet), you may have other obligations.
JoeyDVivre Wrote: ------------------------------------------------------- > It’s not close, you can’t trade on MNPI though it > would usually be in your client’s financial > interest to do so. Most MNPI is about the stock > going up not down (tender offers, etc). If you > have MNPI that says a stock is going down (e.g., > their oil rig is on fire and they havent told > anyone about it yet), you may have other > obligations. What would those other obligations be? Do we have a standard for that?
Just the obey all applicable laws standard. Anyway, my main point is that almost any question you encounter on the exam will relate to MNPI causing you to want to buy the security. You can, of course, make up situations like “you find out the negative results of some drug trial before everyone else”
I agree with AndyNZ. It is always better to at least try to aim for greater good than assure the gain to one client. P