Question ID#: 39163 Betsy Fox is an investment advisor who has a client, Don Gordon, who is an employment lawyer. At lunch, Fox noticed Gordon and the Chief Financial Officer of Blue Star Company at the next table. She overhears them talking and ascertains that Blue Star is about to announce higher than expected earnings. Before the earnings release, Gordon contacts Fox and asks her to purchase 3,000 shares for his portfolio. Fox: A) must refuse to purchase shares for Gordon. B) can only purchase shares for her personal account after informing all of her clients about the potential of the increase in earnings. C) can purchase shares for Gordon, but cannot ever purchase shares for her personal account. D) must wait until after she purchases the 3,000 shares for Gordon to purchase shares for her personal account, and then must keep the information quiet. Your answer: C was incorrect. The correct answer was A) must refuse to purchase shares for Gordon. According to Standard II(A), Material Nonpublic Information, Fox cannot act or cause others to act on material nonpublic information until the information is made public. The information overheard at lunch was material and nonpublic; therefore, Fox must wait until the information is made public before accepting Gordon’s order. ****************** If the client instructs Fox, isn’t she supposed to act on the instructions irrespective of material-non public info
If she acts on this trade, then she is “assisting in a violation” by knowledge that her client recieved material nonpublic info.
A inform fox that he is about to do insider trading which is COMPLETE NO NO in most parts of world.