- CFA Exams
- CFA Level I Exam
- Topic 10. Ethical and Professional Standards
- Learning Module 71. Guidance for Standards I-VII
- Subject 5. Standard II (A) Material Nonpublic Information
CFA Practice Question
Wilfred Clark, CFA, accumulates several items of nonpublic information through contacts with computer companies. Although none of the information is "material" individually, Clark concludes, by combining the nonpublic information, that one of the computer companies will have unexpectedly high earnings in the coming year. According to CFA Institute's Standards of Professional Conduct, ______
B. Clark may use the nonpublic information to make investment recommendations and decisions.
C. Clark must make reasonable efforts to achieve immediate public dissemination of the nonpublic information.
D. Clark may use the nonpublic information but only after gaining approval from a supervisory analyst attesting to its non-materiality.
A. Clark may not use the nonpublic information.
B. Clark may use the nonpublic information to make investment recommendations and decisions.
C. Clark must make reasonable efforts to achieve immediate public dissemination of the nonpublic information.
D. Clark may use the nonpublic information but only after gaining approval from a supervisory analyst attesting to its non-materiality.
Correct Answer: B
User Contributed Comments 12
| User | Comment |
|---|---|
| kalps | Mosaic theory - each on its own is not material |
| Sandy69 | Since information is non - material hence can be used |
| lijia1 | I chose C ,cos the words 'although' misleads me, to make the consideration of the whole as 'material' |
| Slothrop | Mosaic Theory allows one to combine public information and non-material non-public information to infer information which would be material if it were disclosed by the company. |
| buzai2000 | the key word is concludes |
| Challs | because Clark drew his own conclusions based on information that he has been specifically given for that purpose he can not be held in violation of the code, he did not disclose any inofrmation that prompted his conclusions, jus his conclusions. |
| TammTamm | This was a good question. I missed it the first time. |
| ggupta | Mosiac Theory - Analyst can risklessly combine the information atatined from various sources (obviously Non Public) to make the Investment recommendation. |
| AUAU | How about consulting supervisor? Is this needed? The stds not mentioned. |
| Raok | What I don't get about the mosaic theory is how is combining nonpublic information become public? isn't the theory contradict itself? |
| gill15 | Not following this - It states in study guide we can use information that is public WITH information that is non-public non- material and it is not a violation. In this example we are only given Non-Public Non Material information - I dont see any public information in this question. I would say we cant use it. Can somebody explain? |
| raffrobb | it seems to me 1)how the non public information is acquired and 2)the nature and content of this non public information is pertinent to Mosaic Theory |