- Greg Allen is a security analyst and visits David Dawson, the Chief Financial Officer of Edmonds Company. Dawson reveals a great deal of nonmaterial financial data to Allen, data that Dawson routinely reveals to all security analysts who visit him. From this data and other industry information, Allen conjectures that Edmonds is likely to make a tender offer for another company in the industry, a fact that if true would be considered material to the value of the company. Allen: A) should send a copy of the report to Dawson for verification before disseminating the report to clients. B) must not disseminate the information or use it for trading purposes until the tender offer is announced. C) can publish his conclusion in a research report. D) can trade in the stock, but must not publish the information until the tender offer is announced. 2. A CFA Institute member conscientiously maintains records of changes in security regulations. The member notices that his colleagues do NOT, and does NOT say anything. Is this a violation of Standard I(A)? A) Yes, and the member should disassociate from these colleagues. B) Yes, because the member is bound by the Code of Ethics. C) No, as long as the colleagues do not violate the new rules. D) No, as long as he allows the colleagues access to his files. I marked 1. D 2. C I did not understand the 2nd question at all. The first one, I felt, was tricky.
I’m going with B and C I hate ethics…
rpradeephere Wrote: ------------------------------------------------------- > 1. > > Greg Allen is a security analyst and visits David > Dawson, the Chief Financial Officer of Edmonds > Company. Dawson reveals a great deal of > nonmaterial financial data to Allen, data that > Dawson routinely reveals to all security analysts > who visit him. From this data and other industry > information, Allen conjectures that Edmonds is > likely to make a tender offer for another company > in the industry, a fact that if true would be > considered material to the value of the company. > Allen: > > A) should send a copy of the report to Dawson for > verification before disseminating the report to > clients. > > B) must not disseminate the information or use it > for trading purposes until the tender offer is > announced. > > C) can publish his conclusion in a research > report. > > D) can trade in the stock, but must not publish > the information until the tender offer is > announced. > > 2. > > A CFA Institute member conscientiously maintains > records of changes in security regulations. The > member notices that his colleagues do NOT, and > does NOT say anything. Is this a violation of > Standard I(A)? > > A) Yes, and the member should disassociate from > these colleagues. > > B) Yes, because the member is bound by the Code > of Ethics. > > C) No, as long as the colleagues do not violate > the new rules. > > D) No, as long as he allows the colleagues access > to his files. > > > > I marked > > 1. D > 2. C > > I did not understand the 2nd question at all. The > first one, I felt, was tricky. it is C and B. pretty sure C == mosaic theory B == CFA members need to promote good practice.
Correct. It is C and B. Doubt: 1. Publishing a report on deducing a tender offer seems very far fetched to me from ethics. I though mosaic theory meant we can take decisions to trade based on any conclusion we reach. But are we allowed to propagate that conclusion? 2. I did not understand this question. Its like, I maintain diligently changes on securities and stuff. My colleagues do not say anything about this. So, wassup coz of that? Did I misunderstand the question?
I agree with daj244 on these. They try to throw you off on the first question by adding the line about the information being material if true, the key is that the information shared by the CFO is NON-material. 2 is self explanatory.
rpradeephere - with question number two the key is he notices his colleagues are not maintaining records and decides to do nothing.
Standard I(A) says: Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations. Doesn’t say anything about maintaining records. You’re good as long as you understand and comply with all applicable laws.
I chose C for #2.