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The term "material" in the phrase "material nonpublic information" refers to information that is likely to affect significantly the market price of the issuing company's securities or that:

A)
is acquired by the financial analyst from a special or confidential relationship with the issuing company.
B)
is likely to be considered important by reasonable investors in determining whether to trade a particular security.
C)
is derived by the financial analyst from direct communication with an issuing company's management.


An item of information is material if its disclosure would be likely to have an impact on the price of a security, or if reasonable investors would want to know the information before investing.

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Andrea Waters is an investment analyst who has accumulated and analyzed several pieces of nonpublic information through her contacts with drug firms. Although no one piece of the information she collected is "material," Waters correctly concluded that the earnings of one of the drug companies would be unexpectedly high in the coming year. According to CFA Institute Standards of Professional Conduct, Waters:

A)
cannot legally invest or make recommendations based on this information.
B)
may use the information, but only after approval from a compliance officer or supervisor.
C)
can use the information to make investment recommendations and decisions.


Members who can piece together items of nonmaterial nonpublic information with public information can, based upon the mosaic theory, use such information for trading purposes.

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Which of the following statements regarding Standard II(A), Material, Nonpublic Information, is least accurate?

A)
Material, non-public information regarding a tender offer may not be traded on.
B)
If you receive the information in a public forum, it has been disseminated, and you can trade on it.
C)
Information received from an insider who is not breaching his fiduciary responsibility may be traded on.


If the information is material and nonpublic, the Member or Candidate cannot trade or cause others to trade. It does not matter if the insider did not breach his fiduciary responsibility. The inside information is still material and nonpublic.

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Trude Front, CFA, is a portfolio manager. While in the normal course of her duties, she happens to overhear material non-public information concerning the stock of VTT Bowser. She purchases several exchange traded funds which contain VTT Bowser, while shorting similar exchange traded funds which do not contain VTT Bowser. This is most likely:

A)
not a violation of Standard II(A) "Material Non-Public Information."
B)
only a violation of Standard II(A) "Material Non-Public Information" because Front is simultaneously shorting the funds which do not contain VTT Bowser.
C)
a violation of Standard II(A) "Material Non-Public Information."


This is a violation of Standard II(A) "Material Non-Public Information" irrespective of whether Front is simultaneously shorting the funds which do not contain VTT Bowser. Her trades are motivated by material non-public information.

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thx

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thanks a lot

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