Lynne Jennings is a research analyst for a large brokerage company following the chemical industry. While flying through Chicago, Jennings visited her sister who works in the airport hospitality center for an airline. Many meetings take place at the center on any given day. At the center Jennings saw several senior officers who she knows are from the largest and fourth largest chemical companies walk into a conference room. She concluded that negotiations for an acquisition might be taking place. She told her sister this, and her sister asked her not to disclose how she got the information. Jennings should: A.) write a research report describing that she witnessed the senior officers together in the hospitality center, and must mention in the report that her sister is an employee of the center. B.) not write a research report disclosing the meeting. C) write a research report mentioning the meeting but not disclose how she knew that the meeting occurred. D) write a research report describing that she witnessed the senior officers together in the hospitality center, but need not mention in the report that her sister is an employee of the center.
D? Seems like mosaic theory. I didn’t see anything that would lead me to believe she couldn’t have witnessed this without the sister’s involvement.
This one is a toughy! I’m going with D on this one.
i don’t like any of the answers i would be looking for “write a research report combining her previous research with the fact that she witnessed this meeting and thus making blah blah recommedation…” that she has to mention the meeting in the report is silly… but if it has to be…then D it is.
I questioned that part too, but how would she recognize the management of 3rd and 4th largest company by face. She had to be aware of the companies before hand…but agree would like to have “combined with research”.
Your answer: D was incorrect. The correct answer was B) not write a research report disclosing the meeting. The information is material and nonpublic, therefore, Jennings cannot trade or cause others to trade.
think it’s b.
^I am assuming it is nonpublic because not anyone can be in the conference room
Hmm, I would put this under Mosaic theory. It should be ok and it says frequent conferences are held here so conferences are usually public.
if i remember this one correctly should be b.
Well she didn’t seem them “in” the conference room, she saw them enter it from the airline hospitality sweet, which is certainly not “non-public”.
I am positive about B. The fact that several senior officers from the largest and fourth largest chemical companies who walk into a conference room does not mean they are here to discuss M&A. So there is nothing to disclose… What is the answer?
I think the distinguishing feature between this example and the traditional Mosaic Theory example is that Jennings tells her suspicion to her sister, and her sister tells her not to write about it. Had Jennings not expressed her suspicion, and wrote the report based upon her assumption and subesquent research, it would fall under Mosiac Theory. It is by asking her sister for the confirmation (with the implication that sister could provide such denial or confirmation categorically) that she violates Mosiac theory.
Information is material if its disclosure would likely have an impact on the price of a security or if reasonable investors would want to know the information before making an investment decision. In other words, information is material if it would significantly alter the total mix of information currently available regarding a security such that the price of the security would be affected.
She didn’t ask her sister for confirmation.
bathroomrenovations Wrote: ------------------------------------------------------- > I think the distinguishing feature between this > example and the traditional Mosaic Theory example > is that Jennings tells her suspicion to her > sister, and her sister tells her not to write > about it. Had Jennings not expressed her > suspicion, and wrote the report based upon her > assumption and subesquent research, it would fall > under Mosiac Theory. It is by asking her sister > for the confirmation (with the implication that > sister could provide such denial or confirmation > categorically) that she violates Mosiac theory. At the center Jennings saw several senior officers who she knows are from the largest and fourth largest chemical companies walk into a conference room. She concluded that negotiations for an acquisition might be taking place. She told her sister this, and her sister asked her not to disclose how she got the information. It does not say she confirmed anything with her sister. She just saw them walking in and confirmed it on her own.
dumb question… i say - dump it…
nicolargol Wrote: ------------------------------------------------------- > I am positive about B. The fact that several > senior officers from the largest and fourth > largest chemical companies who walk into a > conference room does not mean they are here to > discuss M&A. > > So there is nothing to disclose… > > What is the answer? Your answer: D was incorrect. The correct answer was B) not write a research report disclosing the meeting. The information is material and nonpublic, therefore, Jennings cannot trade or cause others to trade.
mumukada Wrote: ------------------------------------------------------- > dumb question… > > i say - dump it… Thata girl.
In order for Mosaic Theory to apply, she would have had to substantiate her theory through other research that pieced together the merger implication. Since there is no mention in this question about additional investigation, she would have been relying solely on the meeting itself, thus lacking a Reasonable Basis.