Reading 1- LOS LOS B : Q2 black, 2008

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

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

C)   not violated any Standard because he is expressing his personal opinion, and doing so during non-business hours.

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

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The correct answer was D)

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.