Reading 2-II: Standards of Professional Conduct & Guid

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6、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:

A) should record the exchange of information between the investment-banking department and the brokerage department.

B) must divest one of the departments.

C) must liquidate the stocks of companies for which the brokerage has material non-public information.

D) should restrict employee trading in securities for which the firm is in possession of material non-public information.

7、A stockbroker who is a member of CFA Institute has a part-time housekeeper who also works for the CEO of Festival, Inc. One day the housekeeper mentions to the broker that she saw the CEO of Festival having a conversation at his home with John Tater, who is a nationally known corporate lawyer and consultant. The stockbroker is restricted from trading on this information:

A) if the housekeeper says the meeting concerned a tender offer and the broker knows that it is non-public information.

B) only if the broker knows that the meeting is non-public information.

C) if the broker is friends with the CEO of Festival.

D) for all of the reasons listed here.

8、The investment-banking department of the XYZ Brokerage House often has information that would be of significant use to the firm's brokerage clients. In order to conform to CFA Institute Standards of Professional Conduct, which of the following policies should XYZ adopt?

According to Standard:

A) II(A), Material Nonpublic Information, XYZ should encourage their investment banking clients to publicly disseminate this information.

B) III(B), Fair Dealing, all clients should be informed of the information at the same time.

C) II(A), Material Nonpublic Information, XYZ should establish physical and informational barriers within the firm to prevent the exchange of information between the investment banking and the brokerage operations.

D) VI(B), Priority of Transactions, members of XYZ should refrain from trading for their families accounts who are also clients until trades for their other client accounts have been executed.

9、Regarding non-public information, which one of the following statements is FALSE?

A) Disclosing material non-public information would have an impact on the price of a security or be of interest to a reasonable investor.

B) An analyst may use some types of non-public information.

C) A member can be summarily suspended for having received material non-public information.

D) Information that has been disseminated to a few select individuals is still non-public.

10、Marion Klatt, CFA, is a representative for Thiel Financial Network. Klatt received a phone call at home from William Kind, a junior executive at Westtown Development Company, asking whether Klatt had heard that Westtown had just reached an agreement to acquire a major shopping mall chain at a very favorable price. (Klatt had not heard this news, and Klatt was able to confirm that the information had not yet been made public.) Kind requested that Klatt acquire 10,000 shares of Westtown for Kind’s personal account.

Klatt should:

A) not acquire the shares until the information is made public.

B) not acquire the shares until he has contacted Westtown's management and encouraged them to publicly announce the merger discussion.

C) proceed to acquire the shares.

D) not acquire the shares.