Standard VI(b): conflicts of interest / standards for nonpublic information perhaps, understand, interest, standards, material

PieMan

From Standards of Practice Handbook p 160:

"Members and candidates are prohibited from conveying nonpublic information to any person whose relationship to the member or candidate makes the member or candidate a beneficial owner of the person's securities. Members and candidates must not convey this information to any other person if the nonpublic information can be deemed material."

I do not understand what they are getting at here. Can someone please help me understand this and perhaps point me to a sample question that highlights the point?

stalkey

maybe I am way off base.

you are a portfolio manager (fiduciary) and your client owns XYZ Company's shares. You get to know some non-public information which would cause the shares price to go down. If you communicated that to your client - he would sell the shares at their current levels, and that would cause further movement of market price down... which is not good.

similarly if you told him something that was non-public, causing share price to move up (by buying shares) that too is not good.

So if it is non-public information - in this case - since you know that your clients own the shares - it would make sense to go back to the company and get them to make the information public.

CP