Sallie Lewis, CFA, is a research analyst covering the mining industry. Along with other analysts, Lewis visits the primary mine of Gold Rush Mines (GR). During the visit, a major piece of equipment fails and Lewis overhears an unidentified employee state that production will be stalled for six months. Lewis immediately files a sell recommendation on GR without any additional research. Has Lewis violated any CFA Institute Standards? A. No. B. Yes, with respect to client confidentiality. C. Yes, with respect to diligence and reasonable basis. D. Yes, with respect to material nonpublic information. Why for your answer?
C. she should have done more research, not just depended on the word of an “unidentified employee” due diligence!
would your answer change if it has been from the chief operating officer of the company.
Isn’t the information material nonpublic information since its: a) employee inside the firm b) material - could affect the price of a company once it went public c) non-public
even if it was from the CFO, the analyst needs to do more checking into it… a random sentence like that shouldn’t warrant a reco. due diligence!
saurya_s Wrote: ------------------------------------------------------- > Sallie Lewis, CFA, is a research analyst covering > the mining industry. Along with other analysts, > Lewis visits the primary mine of Gold Rush Mines > (GR). During the visit, a major piece of equipment > fails During the visit, Sallie notes that all gold is hauled out of the mine by a single elephant. To her horror, she observes the animal slump to its knees, trumpet mightily a final bellow, and then die. > and Lewis overhears an unidentified employee > state that production will be stalled for six > months. Lewis overhears an employee say “It takes six months to get a new elephant and train him to haul gold out of the mine. This sucks. I’m going home”. > Lewis immediately files a sell > recommendation on GR without any additional > research. Has Lewis violated any CFA Institute > Standards? > A. No. > B. Yes, with respect to client > confidentiality. > C. Yes, with respect to diligence and reasonable > basis. > D. Yes, with respect to material nonpublic > information. > > > Why for your answer?
I would go with C. What is the right answer?
C