ethics: professional conduct

CFA Level II Ethics
#1

come across this in Fiquiz:

i’m fluent in multiple language, so i read a newspaper in Russian and found out a possible merger bw 2 big firms there.

My firm is in US and the market here seems not aware about that news yet. So i rushed to buy stocks of these 2 firms for my clients portfolio.

Do i violate professional conduct here?

A. No

B. Yes, you failed to share information with your firm

C. Yes you acted on nonpublic material info

my Answer:B yes… regarding loyalty to employer, i should not deprive my employer from using my multi language skills. so i should report to my boss, or my team if im the boss, about this. In reality, this is always the case. yes?

Finquiz said A: no problems here.

why is that ? i dont need to share this info i got from my skills to my employer? they pay me for using this skill. no?

#2

its on newspaper so it isn’t non-public -> answer is No

#3

I have a somewhat related question.

What if a material information comes from a newspaper that is available by subscription only?

I mean I can understand it being public because it is still newspaper but I also think it may be nonpublic for the same reason information shared to select analysts during calls are nonpublic since only the select few are told the info.

#4

I saw a related question, I think it was from Qbank where someone overheard two CEO’s discussing information they read in an online subscription only trade industry newsletter. The question was did the individual overhearing violate MNPI. The answers were A)Yes, B)No because the information was not material, and C)No because the information was public. The answer was B.

I asked Kaplan about whether the subscription industry newsletter would be considered pbulic and they said no.

#5

cool, thanks!

so I guess I’ll treat info from subscription newspaper as nonpublic.

#6

I would be more concerned with objectivity. But the information is public and non-material (based upon rumours) so it’s okay to buy.

#7

If an investment professional opts not to subscribe to such potential news, that’s his choice to opt-out of what many others have subscribed to. It’s not the same as select analysts calls, because you were never given the ability to opt-in to begin with, whereas subscriptions to news are available to everyone that wants to opt-in.

In the multi-lingual example, there are many other multi-lingual analysts in the world and if you happen to be the first to stumble upon this piece of public news and act on it before the market has a chance to react, then you’ve effectively beaten the market. No violation on the analysts part for a job well done.

In conclusion, no violation with using what is already available out there to anyone that would make a decision off this info.

#8

but what i asked is, not sharing this info to your firm is OK?

for example u read this in Rusian and bought it for yourself wthout telling the firm. ok???

#9

lol, your job isn’t to tell your firm of every great idea you’ve ever thought of. Your firm also probably already knows about this and so does the market - it’s in the paper.

If your firm DOESN’T know and you bring it up to them during a round table their response (at least my response) would be to tell you to send me your report when you finish it.

No firm is going to make a decision based on a newspaper article.

#10

Kaplan is wrong. Subscription newspapers are considered public information. There is no grey area here. This specific question relates to overhearing a conversation though.

Imagine if you were unable to act on any information you read in the newspaper because you paid $1.50 / week to have it delivered.