Ethics

CFA Level II
#1

Steve Wynn, CFA, is an investment advisor and Jennifer Carey has been a client of his for three years. Carey has shown an interest in international stocks, so they agree to consider putting a portion of Carey’s portfolio in foreign stocks. Wynn makes sure that Carey is aware of the currency and political risks inherent in foreign investing before proceeding. They jointly agree to purchase a small portfolio of stocks in the country of Bellagio because one of the brokerage houses that Wynn uses has a great deal of fundamental research on companies domiciled there. Six months later it is revealed in the news media that Bellagio has had severe insider trading problems which have contributed to the loss on the portfolio. Wynn has: A) violated the Standards by not informing Carey about the insider trading risks, but not by contributing to the problem of insider trading. B) violated the Standards by not informing Carey about the insider trading risks and contributing to the problem of insider trading. C) not violated the Standards.

#2

C - Plausible deniablity of insider action?

#3

C) not violated the Standards.

#4

C is wrong per Schweser. Your answer: C was incorrect. The correct answer was A) violated the Standards by not informing Carey about the insider trading risks, but not by contributing to the problem of insider trading. Wynn should have known about the risks and should have informed Carey of the risks. However, merely investing in a market in which insider trading is prevalent is not a violation of the Standards. - - - - -I have no cluse how an anlyst would know if there is insider trading voilations across the board in a country unless there was a report at the time of investment deciosn. In this case the there is 6 months lag between the investment decison and the news about insider trading.

#5

we got schwesed

#6

QuantJock_MBA Wrote: ------------------------------------------------------- > we got schwesed +1

#7

I guessed A. What does that mean? Probably nothing.

#8

i’ve said it before and i say it again, put the schweser ethics questions up your A$$ and stop wasting everyone’s time. not this close to d-day! schweser qbank is solid for everything else BUT ethics.

#9

I respectfully disagree, Schweser is pretty much SHIT for absolutely everything! PS The correct answer is C because the question states that the insider trading was taking place at the brokerage whereas the answer to the question asserts that the IA should have known about insider trading being prevalent in a particular market. i.e. Schweser answers a completely different question! The question given says nothing of which market the brokerage committed the violation in!

#10

QuantJock_MBA Wrote: ------------------------------------------------------- > we got schwesed lol