A CFO who is a CFA Institute member is careful to make his press releasessome of them containing material and previously undisclosed informationclear and understandable to his readers. While writing a new release, he often has his current intern proofread rough drafts. He also sends electronic copies to his brother, an English teacher, to get suggestions concerning style and grammar. With respect to Standard II(A), Material Nonpublic Information, the CFO is: A) not in violation of the Standard. B) only in violation by showing the pre-release version to the intern but not to a relative such as his brother. C) only in violation by e-mailing the pre-release version to his brother but not the intern, because the intern is in essence an employee of the firm. D) violating the standard by either showing the pre-release version to his intern or sending it to his brother.
guessing … C?
A. Is there a violation unless someone profits from the info?
A. nobody has done anything with the info…
I say D. You should limit who gets to see material nonpublic information and neither the intern nor the brother is a position that should be seeing that stuff. Only investor relations and other executives and stuff like that.
I agree with wanderingcfa although it was a tough call. I think I have seen this question before. I have been disappointed with the answer.
So the correct answer is D. But I don’t understand what’s the problem in showing the material to his intern and get it proof read? An intern is also “half an employee” anyway… I had actually gone with A because he is not acting on the material non public information and neither is he making anyone else act. Isn’t this what the standard says? That we shouldn’t act or cause others to act. So how is this a violation? I’m really pissed off.
Sick this is!! I thought intern who is working on the same team should have the right to see/review the material what his boss has prepared. Oh well… there is nothing much that we could do about Ethics.
Here is what the CFAI book says at the bottom of page 39 under the procedures for compliance. If a member or candidate determines that information is material, the member or candidate should make reasonable efforts to achieve public dissemination of the information. This effort usually entails encouraging the issuer company to make the information public. If public dissemination is not possible, the member or candidate MUST communicate the information ONLY TO the designated supervisory and compliance personnel within the member’s or candidate’s firm AND must not take investment action on the basis of the information.
wanderingcfa Wrote: ------------------------------------------------------- > Here is what the CFAI book says at the bottom of > page 39 under the procedures for compliance. > > If a member or candidate determines that > information is material, the member > or candidate should make reasonable efforts to > achieve public dissemination of > the information. This effort usually entails > encouraging the issuer company to > make the information public. If public > dissemination is not possible, the member > or candidate MUST communicate the information ONLY > TO the designated > supervisory and compliance personnel within the > member’s or candidate’s firm > AND must not take investment action on the basis > of the information. Thanks for the quote wanderingcfa. Makes sense now. So no one (including an intern) should know anything about material non public information unless the person is the supervisory or the compliance person.
That is what I took it to mean. Only the important people (sorry all you interns) should know important stuff until public dissemination.
i don’t think that rule mentioned above applies here- isn’t that when you find out something that a company hasn’t released yet and how you’re supposed to act kind of encouraging the company to make that info public? that isn’t what the above question is about… it’s more about if a person has non-material info before he releases it, who cannot see it at all. some sort of privacy keeping rule somewhere? i would’ve guessed A not D. i like the quote shown above and we could get tested on what to do if you have to try to get non-public info disseminated and who to tell, but i don’t think it has anything to do with this question. what was the reasoning for D in qbank?
Bannisja, I think the rule applies generally, because if someone were to have material non public info, then he needs to keep it as private as possible, if public dissemination is not possible. It doesn’t matter how he got to know about the material non-public info or whether he did some research which might be regarded as material non public info. The Qbank just mentions that since the info is material non public, the analyst should not involve so many people and try to keep it as quiet as possible.
some of the q bank questions can be very ambiguous…CFA questions are much more straight forward