I had a question regarding the ethics section in the CFAI text about non public material information. The jist of the question is: A well respected analyst will go on TV talking about a certain company. The journalist that will interview the analyst knows that his remarks affect stock prices. Before the interview, the analyst goes over the points he will make on a certain stock during the interview. These points are negative. Before the interview, the journalist sells the stock form her personal account. The book says that she has violated the code. She is a journalist and the text says nothing about her being a chartholder or candidate. Is she truly in violation?
She sold on information that was material (because it would affect the stock price) before it was made public. Being a charterholder or candidate is not relevant here…it’s wrong regardless.
I agree that its wrong, but I remember on some practice questions (schweser or cfai I dont remember) when the answer said that since she is not bound by the code of conduct, she is not in violation.
Sure, in some circumstances that would be correct (i.e. the more strict law rule…CFA vs country). In this case though, the woman trades on material insider information, something that’s wrong and applies to everybody.
Niblita75 Wrote: ------------------------------------------------------- > I agree that its wrong, but I remember on some > practice questions (schweser or cfai I dont > remember) when the answer said that since she is > not bound by the code of conduct, she is not in > violation. On the exam, except if specified otherwise, one shall assume that everyone mentionned in the question is bound by the CFA code of conduct. Likewise, on the accounting question, on the exam, except if specified otherwise, one shall assume that the mentionned companies follow US GAAP.
Then she is absolutely in violation. Thanks for clearing that up olivier.