Question #24
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: 13
Status: Correct
Correct Answer: A
Question
While visiting the CSI Company, Mark Ramsey, CFA, overheard management make comments that were not public information, but were not really meaningful by themselves. However, when this information is combined with his own analysis and other outside sources, Ramsey decides to change his recommendation on CSI from buy to sell. According to CFA Institute Standards of Professional Conduct, Ramsey should:
Answer Choices:
A. not issue his report until these comments are made public
B. report these events to his immediate supervisor and legal counsel, since they have become material in combination with his analysis
C. issue his sell report because the facts are nonmaterial, but maintain a file of the facts and documents leading to this conclusion
Explanation
The use of security analysis combined with nonmaterial nonpublic information to arrive at
significant conclusions is legal and is called the mosaic theory.
(Module 42.3, LOS 42: II(A))