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.

答案和详解如下：

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.

Correct answer is A)

Members may not use material nonpublic information for trading purposes unless, the information was developed under the Mosaic Theory. There is no provision for CFA Institute to issue fines to members.

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

Correct answer is C)

Weather did not violate Standard II(A) because this prohibition applies to recipients who are not directly or indirectly associated with the firm the material nonpublic information is about. As a corporate insider, Weather can use insider information to benefit his firm’s shareholders. Winter violated Standard II(A) because the information is both material and nonpublic and she is required not to trade or cause others to trade on the information.

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

A)   material and public.

B)   nonmaterial and nonpublic.

C)   material and nonpublic.

Correct answer is C)

Information is material if it would be important to the investor in their investment making decision. Information is nonpublic if it is not yet available to the public.

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

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

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

C)    No                                               Yes

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

C)   material and nonpublic.