Question #12
Reading: Reading 42.2 Standards of Professional Conduct Guidance for Standards II
PDF File: Reading 42.2 Standards of Professional Conduct Guidance for Standards II.pdf
Page: 8
Status: Correct
Correct Answer: A
Question
A stockbroker who is a CFA Institute member is called on the telephone by the CEO of a large company. The CEO asks to buy shares of the CEO's company for the accounts of the CEO's children. In the course of the conversation, the CEO says this will really pay off when the upcoming takeover goes through. The stockbroker checks her sources and finds no information about the takeover. In this case the broker should:
Answer Choices:
A. do neither of the actions listed here
B. only execute the order in compliance with Standard III(A), Loyalty, Prudence, and Care. Since the client is buying the stock for the children, there is not a problem
C. execute the order for all clients as required by Standard III(B), Fair Dealing
Explanation
Doing any of these actions would be a violation of Standard II(A), Material Nonpublic
Information. Members and Candidates must not act or induce others to act on material
nonpublic information.
(Module 42.3, LOS 42: II(A))