Worst ethics question EVER period. references, investment, employment, lawyer

Matori

I cannot read this question effectively.  You cannot make wall street references and have Gordon be a lawyer.  If CFAI pulls anything like this I will flip a shut door.
Betsy Fox is an investment advisor who has a client, Don Gordon, who is an employment lawyer. At lunch, Fox noticed Gordon and the Chief Financial Officer of Blue Star Company at the next table. She overhears them talking and ascertains that Blue Star is about to announce higher than expected earnings. Before the earnings release, Gordon contacts Fox and asks her to purchase 3,000 shares for his portfolio. Fox:
A)
can purchase shares for Gordon, but cannot ever purchase shares for her personal account.
B)
can only purchase shares for her personal account after informing all of her clients about the potential of the increase in earnings.
C)
must refuse to purchase shares for Gordon.

thisisbrianly

Haaaa, now I understand

towardsutopia21

Sooraj thank you - was not aware that the maintainence of records applied to this particular case.  Does make sense now.

evolsteevol

Omg.  This one.  Have to disagree - just because colleagues don’t “conscientiously maintain records” of changes in security regulations doesn’t mean they don’t KNOW them, right???  Are they not online at the SEC???  I don’t see how not maintaining a record constitutes NEGLECT.
Ridiculous.


A CFA Institute member conscientiously maintains records of changes in security regulations. The member notices that his colleagues do not, and does NOT say anything. Is this a violation of Standard I(A)?
A)
Yes, because the member is bound by the Code of Ethics.
B)
Yes, and the member should disassociate from these colleagues.
C)
No, as long as the colleagues do not violate the new rules.
Your answer: C was incorrect. The correct answer was A) Yes, because the member is bound by the Code of Ethics.
The last bullet point of the Code says that a member shall “Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.” Ignoring the neglect of rule changes of others would clearly be incongruent with this component. As long as the colleagues do not violate the laws, the member does not have to disassociate himself from the colleagues.

Siddimaula

Why? The answer is C with reason being failing in duty to the client (disclosure).
Mate, you will only get classics like this in the exam, unfortunately!

maxmeomeo

The correct answer is d) Fox is actually the one who made Gordon do the trade and buy BlueStar because Fox’s dad works for BlueStar and Fox wants to run BlueStar, so he convinces his dad to get the BlueStar union on board to do a deal with Gordon, but then Fox realizes that all Gordon wants to do is liquidate the company to cash out the overfunded pension, and then Fox feels really guilty esp because his dad has a heart attack from all the stress so he dumps Darien because she won’t go along with Fox’s plan to get back at Gordon and then Fox runs a really crazy scheme to drive down BlueStar and trick Gordon into selling his controlling shares and Fox saves BlueStar and feels awesome for about 12 hours but then the next day he goes to jail.
It was c.

giorgio10

GarrettL wrote:
I understand that the real answer is C, but personally, I would say A.
By not allowing her client to do the trade, she is actually acting on material nonpublic information herself. By allowing the trade at the request of her client, she is not acting on the information.
From my understanding, you only act on material non public information when you make profit or cause others to make profit using such information at the expense of other market participants.  
I  think the logic here could be reprhased thus:  Should a member knowningly participate in illegal activities or activities that violate provisions of the code of ethics in order to satisfy her client’s request?
In my opinion, choosing A will set a bad precedence with serious consequences.  It means CFA members and candidates are free to trade with material non public information so long as they have a client to shift the blame on.

Sunshine4ever

I understand that the real answer is C, but personally, I would say A.
By not allowing her client to do the trade, she is actually acting on material nonpublic information herself. By allowing the trade at the request of her client, she is not acting on the information.