Question #3 - Reading 43 Application of the Code and Standards Level II

Reading: Reading 43 Application of the Code and Standards Level II

PDF File: Reading 43 Application of the Code and Standards Level II.pdf

Page: 2

Status: Incorrect

Correct Answer: A

Your Answer: B

Shared Context

- Claudel's statement about his education background is: A) truthful, but not in accord with the Code and Standards. B) truthful, and in accord with the Code and Standards. C) not truthful, and not in accord with the Code and Standards.

Question

Which of the following statements is CORRECT?

Answer Choices:

A. Bonnet has violated Standard III(B): Fair Dealing, and Claudel has violated Standard I(B): Independence and Objectivity

B. Bonnet has violated Standard II(A): Material Nonpublic Information, and Claudel has not violated Standard III(A): Loyalty, Prudence, and Care

C. Bonnet has violated Standard IV(A): Loyalty to Employer, and Claudel has violated Standard I(A): Knowledge of the Law

Explanation

Bonnet violated several Standards, including IV(A) and II(B), by manipulating stock prices and profiting from that manipulation at the expense of other purchasers. Standard IV(A) requires that employees not act to injure the firm or deprive it of profits, and Bonnet's personal trading and market manipulation crosses well over that line. However, Bonnet did not violate Standard II(A) Material Nonpublic Information because no nonpublic information was involved. Claudel violated Standard I(A) by contributing to Bonnet's plans to break the law. Under the Code and Standards, Claudel cannot knowingly assist others who are violating the Standards or the law, even if he does not profit personally. While Claudel's ethics are in question, nothing he did for Bonnet is likely to affect his independence, and he did not violate Standard I(B) Independence and Objectivity.

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