Ethics Question problem

"An analyst provides asset management services for a non-profit organization and in return gets free membership in the organization. His supervisor in the organization calls him and tells him to buy a certain stock for the portfolio based upon insider information. The analyst objects, but the supervisor says this is what they have always done and sees no reason for changing now. The analyst complies with the request. With respect to Standards IV(A), Loyalty to Employer, and II(A), Material Nonpublic Information, the analyst violated: a) only Standard II(A) that prohibits insider trading. b) both Standards IV(A) and II(A). c) only Standard IV(A) requiring duty of loyalty. " the correct answer is option (a). I understand that part about material non public info. but my question is why not option (b) which includes Loyalty to employer. Under guidance about Whistleblowing, in order to protect clients or integrity of the capital market, one can violate this rule about loyalty to employer. by using MNI, you are violating the integrity of the capital market. the analyst should have rejected and dissociated himself from the job at least. thanks in advance

Not really following your argument here. If the analyst is allowed to reject his employer’s demands then obviously he wouldn’t have violated the standard and you can rule out both B and C.

that is the point i am making. he is allowed to reject the buy order. he didn’t reject it and rather went with it. he acted on mat-non pubic info. he should have rejected the buy order and did the “Whistleblowing” thing or dissociating himself from the job. as he didn’t, he is in violation with the Loyalty to Employer…isn’t it? OR rather I am the stupid one who can’t get the logic here…lol

I think your logic is flawed. Failing to disassociate =/= Violating Loyalty to Employer

hmmmm does this mean that he bought the shares and thus did not violate Loyalty to Employer? and if he rejected and dissociated, he would have violated Loyalty to Employer? but his dissociation would have been justified also because his duty towards the integrity of the cap market? Thank you for helping me out “notic4lyf”.

Basically the whole Loyalty to Employer standard doesn’t apply here. He can choose to accept the decision and violate II(A), Material Nonpublic Information or He can choose to disassociate and violate no standards. Hope that helps.