Ethics question question, research, examples, material, releases

scruge

So in the reading of the CFAI book:
pg. 50
[removed by admin]
pg. 54 example 4:
[removed by admin]
———————————————————-
In both examples the information is material non-public information.  Is the above example not a violation because the research was paid for?  If so, what if an analyst releases a report to a select group before others because they paid more money, is that a violation of selective disclosure?  And if its because there was a payment issue, isn’t the bottom example more a violation because of stealing as opposed to trading on material non-public information?

maratikus

I think once you get to Standard III, things will become clearer. If your business clarifies (for all clients) that paid customers receive privileged information, then you’re OK. I think you’d also have to clearly delineate what “privileged information” means. However, if your business doesn’t make such a distinction, then you’d have to mass broadcast the information equally.
In the Madison example, it is clear that the firm’s recommendation is not part of a tiered service. So trading on that information before the info becomes public (via the weekly publication) is a violation.
Not sure if this helps…

thisisbrianly

The analyst in question is publishing a report (in a magazine). The broker in question has no obligation to do so. But given that the report is material and prepublication trading based on the report would be based on nonpublic (albeit not inside) information.