let's invent our own ethics situations

Hi guys… let’s make up our own ethics situations and discuss them…

“a guy who has diligent and reasonable basis for purchasing stock A is walking to his broker to submit a buy order, he stops for coffee and overhears CEO and CFO of the company A saying that the results will be really higher and annouced tomorrow. Is he in violation if he purchases the shares ?”

Have fun…


Good idea

One from me:

Lili Vandalu, portfolio manager, prepares a report on the Brazilian capital markets, including possibilities for diversification and return enhancement. She performs an extensive investigation of the country’s risk factors. Finalizing her research, she prepares the report, including only information which she deems important, omitting certain aspects.


NOT A violation! that’s her job!

You attend a party with a client and at the party, the CEO of a large corportation that your client has holdings in accidentally reveals to a medium sized crowd of people some material nonpublic information including som VERY abysmal earnings that’ll be released in a week. You clearly remember seeing your client in that room when the announcement was made but you never interacted with him. The next day, your client asks you to sell a very large position of that company’s stock but you refuse his direct order, claiming he was at that meeting when the inside information was released.

The earnings announcement was made the next week and the stock plummets -20%… your client reports you to CFAI because you didn’t take his order and it caused a huge loss but you claim your client had material nonpublic information.

I don’t think so - the reason for the purchase is analysis based on diligence and a reasonable basis…not buying BECAUSE of what he overheard. If he say increased the size of the order after hearing that, then yes - violation. But I wouldn’t say so in this case. My question is - when would a manager encounter the CEO AND CFO of a company he covers while walking over to the trader’s desk? lol