Question #21
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: 12
Status: Correct
Correct Answer: B
Question
An analyst manages the assets of a charitable organization. Her supervisor tells her to buy a certain stock because the company's chief executive, who is also a board member in the organization, told her the company's earnings will exceed the market forecast when they are released next week. The analyst objects, but the supervisor says this is what they have always done and sees no reason for changing now. The analyst complies with the request. The analyst violated the Standard(s) concerning:
Answer Choices:
A. only loyalty
B. only material nonpublic information
C. both loyalty and material nonpublic information
Explanation
Complying with the request is a violation of Standard II(A) Material Nonpublic Information
which prohibits trading on insider information. Standard IV(A) Loyalty deals with issues
such as independent practice, leaving an employer and continuing to act in the employer's
best interest until their resignation becomes effective, and whistleblowing.
(Module 42.3, LOS 42: II(A))