Question #21 - Reading 42.5 Standards of Professional Conduct Guidance for Standards V

Reading: Reading 42.5 Standards of Professional Conduct Guidance for Standards V

PDF File: Reading 42.5 Standards of Professional Conduct Guidance for Standards V.pdf

Page: 12

Status: Correct

Correct Answer: A

Shared Context

- Based on the information presented in this situation, Jones has an obligation to do all of the following EXCEPT: A) encourage his employer to review the compliance procedures as they relate to material nonpublic information issues. B) wait to trade on the information until after a reasonable period has passed. C) encourage public dissemination of the information.

Question

When recommending the purchase of FinSoft company shares to Bamyeh, Jones least likely violated the Standard relating to:

Answer Choices:

A. diligence and reasonable basis

B. loyalty to employer

C. integrity of capital markets

Explanation

It is unlikely that Jones violated the Standard relating to diligence and reasonable basis, as Jones appears to have had a reasonable basis for the recommendation as Standard V(A) requires. Once Jones was in possession of material nonpublic information, he was prohibited by Standard II(A) of acting or causing others to act on this information. Jones also violated her duty of loyalty to her employer under Standard IV(A) by encouraging Bamyeh to trade in FinSoft and other securities, possibly harming Lincoln's customer's ability to acquire FinSoft at an attractive price.

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