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- 2006-7-29
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- 2013-3-6
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With respect to the arrangement that BIA has with Accommodate, based on the provided information: A) | a violation has occurred because BIA charges the same fee structure to all of its clients. |
| | B) | no violation has occurred as long as BIA informs CFA Institute that the firm receives research information from the brokerage firm. |
| | C) | a violation has occurred because a firm like BIA is not allowed to receive research information from outside sources. |
| | D) | no violation has occurred since BIA charges the fee structure to all of its clients. |
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Answer and Explanation
Watson has violated the Soft Dollar Standard. For directing the trades through a given brokerage firm, BIA is getting research that only benefits about 10 percent of the clients. The remaining clients are paying the same fees, but they are not getting the same benefit. If BIA were to inform all of its clients of the arrangement, it might not be a violation, but the vignette says that information has not been disclosed.
With respect to how Jackson allocated the shares in the IPO of the technology company, has Jackson acted in accordance with the Code and Standards? | A) | No, Jackson has violated Standard VI(B) Priority of Transactions. |
| | B) | Yes, Jackson allocated the shares of the offering fairly on a pro rata basis to all client accounts. |
| C) | No, Jackson has violated Standard III(C) Suitability. |
| | D) | Yes, Jackson has maintained the confidentiality of the new client accounts with the underwriter in allocating shares of the offering. |
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Answer and Explanation
Jackson violated Standard III(C) Suitability by allocating shares of the public offering to the two new client accounts without establishing an investment objective or guidelines for the accounts. Standard III(C) requires a reasonable inquiry into the clients financial situation, investment experience, and investment objectives prior to taking any investment actions. Such information must also be updated regularly. The Standard also requires that the appropriateness and suitability of investment recommendations or actions be considered for each client, including 1) client needs and circumstances; 2) basic characteristics of the investment involved; and 3) basic characteristics of the total portfolio. Although the shares were allocated pro rata across all client portfolios, no investment action should have been initiated for the new clients without appropriate consultation regarding investment objectives and guidelines.
Given Brunswicks current ownership in New Medical, the Code and Standards require Jackson to: A) | not initiate any investment action prior to the information being publicly disseminated. |
| | B) | trade the shares in client accounts before any accounts for himself, family or friends. |
| | C) | buy more shares for any client accounts that are underweight the position. |
| | D) | not take any investment action but communicate the information to other members of the proxy committee in preparation for consideration. |
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Answer and Explanation
Under the Code and Standards, Jackson should not initiate any investment action on the information provided by Watson in order to prevent a violation of Standard II(A) Material Nonpublic Information. The information provided by Watson involved a proposed confidential tender offer for New Medicals outstanding shares and, therefore, was material, nonpublic information. Information is material if its disclosure would have an impact on the stock value or if a reasonable investor would want to know the information prior to making an investment decision. Material is nonpublic until it has been generally disseminated to the marketplace and investors have had an opportunity to react to the information. Since the information involved a tender offer, Watsons communication to Jackson was possibly a violation of federal securities laws. Neither Jackson, nor Watson should take any investment action regarding New Medical. Upon receipt of the information, Jackson should inform his compliance officer of the information, but otherwise keep the information confidential. However, not responding to unsolicited requests from clients to purchase New Medical is a possible violation because it appears that he is not acting in the best interest of the clients.
Given Watsons actions, all of the following are most likely violations of the Code and Standards EXCEPT: | A) | Standard II(A) Material Nonpublic Information. |
| | B) | Standard I (A) Knowledge of the Law. |
| C) | Standard III(E) Preservation of Confidentiality. |
| | D) | Standard III(A) Loyalty, Prudence, and Care. |
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Answer and Explanation
Standard III(E) Preservation of Confidentiality does not appear to have been violated by Watsons actions. She does not appear to communicate any confidential information provided by clients, prospects, or her employer concerning the scope of any client-member, prospect-member or employer-member relationship. Watsons actions, however, do appear to violate Standard I (A) Knowledge of the Law, Standard II(A) Material Nonpublic Information and Standard III(A) Loyalty, Prudence, and Care. The information provided by Watson involved a proposed tender offer for New Medicals outstanding shares and, therefore, was material, nonpublic information. Information is material if its disclosure would have an impact on the stock value or if a reasonable investor would want to know the information prior to making an investment decision. Material is nonpublic until it has been generally disseminated to the marketplace and investors have had an opportunity to react to the information. Since the information involved a tender offer, Watsons communication to Jackson was possibly a violation of federal securities laws. Neither Jackson, nor Watson should take any investment action regarding New Medical. New Medical shares should be added to Brunswicks restricted list to prevent a violation. The communication of the tender offer information by Watson to Jackson, is a probable violation of Standard III(A) Loyalty, Prudence, and Care, since she serves on the board of New Medical, and has a duty to the firm. Finally, Watsons misuse of material, nonpublic information would also violate Standard I (A) Knowledge of the Law by not complying with applicable laws, rules, and regulations.
With respect to the complaint Mills filed against Jackson, and the subsequent investigation of Mills by CFA Institute, which of the following statements is least accurate? | A) | Jackson did not violate the Code and Standards if he provides Mills trading information to CFA Institute. |
| | B) | Jackson may not use the CFA designation without filing a Personal Conduct Statement on an annual basis. |
| C) | Jackson violated the Code and Standards by putting New Medical Developments on its restricted stock list. |
| | D) | Jackson violated the Code and Standards by not responding to Mills. |
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Answer and Explanation
Rules concerning the confidentiality of client information do not apply to investigations of CFA Institute, which will keep any information it receives confidential. Jackson does not violate a Standard by placing a stock on a restricted list when the firm is in possession of material nonpublic information, and this is a recommended move. However, unsolicited requests from clients deserve a response. Jackson is putting his self-interest above his own by trying to protect himself by not responding to client inquiries concerning New Medical. Members and Candidates must renew their commitment to abide by the Code and Standards on an annual basis.
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发表于 2008-9-16 16:51
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