leadcfa

Michael Malone, CFA, is an investment analyst for a large brokerage firm in New York who covers the airlines industry. After hours in his personal time, Malone maintains an online blog on which he expresses his personal opinions about various investment opportunities, including, but not limited to, the airlines industry. On his blog, he posts a very negative investment opinion about WestAir stock. Malone knows that WestAir's stock will be downgraded to a “sell” by his firm next week. Malone has:

A) violated Standard IV(A) Loyalty by divulging confidential information that is the intellectual property of his employer.

B) violated Standard II(A) Material Nonpublic Information by releasing material that could negatively impact the price of the security.

C) violated Standard VI(B) Priority of Transactions by releasing material information to the public before releasing to the firm’s clients.

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Malone is in violation of Standard II(A) because the information is both material and nonpublic. He is in violation whether or not he divulges the impending downgrade by his firm on his blog, because he is using nonpublic information. A “sell” opinion on a security issued by a large brokerage firm will almost certainly impact the stock’s price.

leadcfa

Which of the following activities would be following a component of the Code of Ethics explicitly?

A) Consulting with colleagues about opinions you reach in your research.

B) Attending continuing education seminars on investing and inviting colleagues to come along.

C) Maintaining a list of colleagues who have violated the CFA Institute standards.

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The Code states that a member shall “Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.” None of the other answers qualify.

leadcfa

According to the Standards of Professional Conduct, investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner. This concept is most directly addressed in:

A) Standard V, Investment Analysis, Recommendations, and Actions

B) Standard VI, Conflicts of Interest

C) Standard I, Professionalism

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Standard VI(B) addresses priority of transactions, and states that “Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner.”