In this case study Schweser suggests that merely taking a position in a recommended stock is “divulging confidential information through his own investment activities”. What do you guys think? His firm handles only HNW individuals, so he doesn’t have the $$ to open an inhouse account presumably. So he can’t buy a few shares through a discount broker just because his firm recommends it? This isn’t a question of front running, what Schweser says makes it sound like he can never buy a stock so long as it’s on his firm’s Buy list.
TooOld4This Wrote: ------------------------------------------------------- > In this case study Schweser suggests that merely > taking a position in a recommended stock is > “divulging confidential information through his > own investment activities”. What do you guys > think? > > His firm handles only HNW individuals, so he > doesn’t have the $$ to open an inhouse account > presumably. So he can’t buy a few shares through a > discount broker just because his firm recommends > it? This isn’t a question of front running, what > Schweser says makes it sound like he can never buy > a stock so long as it’s on his firm’s Buy list. That is because he talked about his “newfound” information with his friends and family. Research is proprietary and you cannot divulge this information. This is violation of Loyality to Employer and Loyality to Clients
IMHO Pearl case should be studied in details. It looks like a real CFAI exam question
Do ethics ever appear in the written answer question format? If I saw something like the Pearls on the exam, I don’t know if I could pick out all the violations, and which Standard was violated.