You know the recommendation of the report, which will be released 3 days later. But then you trade for your suitable clients today. 1) What violations are done? 2) Does this involve nonpublic material information?
MNP - Yes.
It all depends. If it is inhouse research report and you trade for your clients and then release research to public - No violation. If it is a report your came about by overhearing or stuff like that - then MNP
definitely MNP. not sure i could pick the other violations out of thin air, but there are probably others. MNP is the big one though.
that’s true – if it’s buyside research (in house) there is no violation. i was assuming it was sell side research.
It is internal report, it is not MNP. If you dissement this information all your clients in fair manner and then trade suitable accounts you are not in volation. MNP is not even close here.
buy side its not - 100% agree. sell side it is MNP without a doubt. so this would be a question where we’d have to pay close attention to the firm’s operations to know what they do.
However you look at it, it is a violation. If the report was in house then you haven’t treated all clients fairly. If it is earnings announcement of some company then is is material non-public information.
Actually this question was inspired by those very typical FAIR DEALING/PRIORITY OF TRADING questions. Let me repeat the question. “You know the recommendation of the report, which will be released 3 days later.” (A guy announces in a meeting that he will publicize report, which recommends buy, next Monday) “But then you trade for your suitable clients today.” (you quickly trade for your firm client (violate fair dealing) OR you quickly call your broker to trade your personal account (violate priority of trading) ) “1) What violations are done?” (then we will say of course fair dealing / priority of trading …) (but then question is: for these typical questions, is there any MNP violation?) Now … “2) Does this involve nonpublic material information?” Or JUST MNP?
There’s an exception in the material non-public information section about this which I think is connected. If you are an analyst and your report will affect the market and you only send the report to your clients it could be argued that they are all trading on material non-public information, but the work around for this is: everyone could become your client and they choose not to. So this is not a violation. Think kind of relates to the situation you describe.
what’s the difference b/w getting insider information from IB unit and research unit?! the recommendation can significantly affect the stock price i think it is MNP +neither fair dealing nor priority of transactions
itstoohot Wrote: ------------------------------------------------------- > what’s the difference b/w getting insider > information from IB unit and research unit?! the > recommendation can significantly affect the stock > price > > i think it is MNP > +neither fair dealing nor priority of transactions Please have a look of example 1, p.66, Standards of Practice Handbook. Are you saying this is JUST MNP violation, but NOT fair dealing violation?
which book is that? CFAI Book 1??? i don’t have the book with me right now but the electronic version of ethics. well you can say fair dealing, actually the wording makes you think there’s a fair dealing violation(for firm trades). BUT using insider information is a violation at first, and it don’t matter which standards you violate after that. That’s my understanding. But the question is a good one indeed. > Please have a look of example 1, p.66, Standards > of Practice Handbook. Are you saying this is JUST > MNP violation, but NOT fair dealing violation?
itstoohot Wrote: ------------------------------------------------------- > which book is that? CFAI Book 1??? i don’t have > the book with me right now but the electronic > version of ethics. yes, i refer to that PDF for ethics. Thoughts on this? > well you can say fair dealing, actually the > wording makes you think there’s a fair dealing > violation(for firm trades). BUT using insider > information is a violation at first, and it don’t > matter which standards you violate after that. > That’s my understanding. But the question is a > good one indeed.