Question #44 - Reading 42.4 Standards of Professional Conduct Guidance for Standards IV

Reading: Reading 42.4 Standards of Professional Conduct Guidance for Standards IV

PDF File: Reading 42.4 Standards of Professional Conduct Guidance for Standards IV.pdf

Page: 19

Status: Correct

Correct Answer: A

Shared Context

- With regard to Standard VII(B)—Reference to CFA Institute, the CFA Designation, and the CFA Program: A) neither Montpier nor Taylor is in compliance. B) both Montpier and Taylor are in compliance. C) only Taylor is in compliance.

Question

Taylor's actions regarding Breakthrough Corp.:

Answer Choices:

A. violate Standard II(A)—Material Nonpublic Information because the information was not in the public domain

B. do not violate Standard II(A)—Material Nonpublic Information because he was only confirming what he already suspected

C. did not violate Standard I(D)—Misconduct because he did not misappropriate the information

Explanation

Taylor's use of the material nonpublic information provided to him in confidence by a researcher is a clear violation of Standard II(A). The professional-misconduct Standard prohibits actions that reflect negative on "professional reputation, integrity, or competence." Since Taylor has signed a confidentiality agreement, his violation of the agreement definitely says something about his honesty. Thus, he is in violation of Standard I(D). Standard IV(A) only applies to work in competition with the employer.

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