Question #37
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: 20
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
A brokerage firm has a trading department and an investment-banking department. Often the investment-banking department receives material non-public information that would be valuable in advising the firm's brokerage clients. In order to comply with the Standards, the firm:
Answer Choices:
A. should restrict employee trading in securities for which the firm is in possession of material non-public information
B. should record the exchange of information between the investment-banking department and the brokerage department
C. must divest one of the departments
Explanation
Restricting employee trading in stocks for which the firm has material non-public
information is the best answer. Recording the exchange of information between the two
departments is not the best option because there should be no exchange of information
between these two departments. Divesting a department is not a suitable method for
addressing this potential problem.
(Module 42.3, LOS 42: II(A))