Reading 2-II: Standards of Professional Conduct & Guida

describes, class, black, material, following

Q9. Which one of the following least accurately describes the CFA Institute Standard about using material nonpublic information?

A) An analyst using material nonpublic information may be fined by CFA Institute.

B) An analyst may use material nonpublic information as long as it has been developed under the Mosaic Theory.

C) An analyst may violate this Standard by passing information to others even when it has been obtained from outside the company.

Q10. Carl Weather, CFA, is the chief financial officer of Talbot Enterprises. Based on inside information about Talbot’s favorable prospects, Weather concludes that Talbot’s common stock price is substantially undervalued in the market. With the approval of Talbot’s Board of Directors, Weather announces a program for his firm to repurchase $100 million of its own stock in the market. Talbot’s stock price rises immediately after the announcement of the repurchase program.

Reese Winter, a CFA Institute member, is Weather’s assistant. While waiting in Weather’s office, Winter reads an internal memo marked “confidential” from Talbot’s chief accountant to Weather. The memo states that Talbot sustained an unexpected substantial profit during the past quarter, and its earnings projections show a substantial increase compared with previous estimates. Winter uses her cell phone to call her brother and discloses this information to him. Her brother immediately buys 1000 shares of Talbot’s stock.

Did the actions of Weather and Winter violate Standard II(A): Material Nonpublic Information?

Weather Winter

A) Yes No

B) Yes Yes

C) No Yes

Q11. Insider trading can be defined as information that is:

A) material and public.

B) nonmaterial and nonpublic.

C) material and nonpublic.