if a portfolio manager was instructed by his client A, who is the brother of CEO of company FAIL, to dump all his share of company FAIL. (client A owns 6% of FAIL’s share). and the portfolio manger executed his instruction. 2 days later, FAIL’s share fall more than 70% due to adverse regulation change. in this case, why portfolio manager A violate the CFA code of prohibition against use of material nonpublic information? I don’t see he used any. ,…
dont think he did either… he didnt act on the materail non public info, nor did he have any. Maybe he shoudl have inquired as to why the client was dumping knowing his circumstances of a close relationship to CEO?
my 1.5 cents is that whats the reasonable basis for this trade ,…ur not a broker jus mindlessly executing trades for client ur a pm in which case the IPS and capiltal allocation should form the basis of decisions …in other words its more a long term view,…discuss
When an individual owns 6% of the outstanding shares in a company, and apparently it was known of the relationship of the client with the company, the PM would have been prudent to ask to reason for offloading the shares.