CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Frank changes his investment decision based solely on a conversation overheard in a restaurant. Which standard has he violated?

A. Mosaic Theory Standard
B. Prohibition against the Use of Material Nonpublic Information
C. Diligence and Reasonable Basis
Correct Answer: C

User Contributed Comments 8

User Comment
kalps Mosaic tehory is different whereby you can get inside information from different sources and piece it together to to make an investment decision
yanpz Why B is incorrect? I thought code requires that such "overheard" information can not be used.
word i think someone screwed up.
Carter Not necessarily. The question never said that the information overheard was material, nonpublic information. Suppose for example that the conversation was nonmaterial public information being discussed. We are not specifically given that detail in the question. Therefore it does not allow B to be a correct answer. All we know is that he didn't check his facts before changing his decision.
Farina Carter is right. From experience of taking mock exams, this is a common 'trick' used to throw you. Use of material, non-public information is a violation but it needs to be stated explicitly in the question, if it isn't don't assume that it is. In this case, from the details given Frank has DEFINATELY violated Standard V.a., he MAY have violated other standards, but you cannot determine this without more information.
wundac Mosaic theory is based on once personal opinion and analysis of available information (while abiding to all standards)
rocyang conversation held by whom?
johntan1979 Tom and Jerry
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