CFA Practice Question
Liliana works for Bear Funds, a brokerage firm. Bear has a policy of not allowing its employees to trade in securities in which it has large holdings. A list of such securities is circulated on a daily basis to the employees. Liliana knows of this restriction. However, a few days ago, she happened to purchase a few shares of a firm on Bear's restricted list. The total value of the purchase was less than $500.
Liliana should ______
A. inform her immediate supervisor and accept any sanctions.
B. report the transaction to the compliance department and see how best to unwind the transaction.
C. not do anything, because the activity is of negligible size.
Explanation: Standard VI (A) - Disclosure of Conflicts
User Contributed Comments 7
| User | Comment |
|---|---|
| robkaz | Even if the stock was not on the list when she purchased? I cannot tell from the question if the stock was on the list when she purchased. |
| stefdunk | yes. if your company restricts stocks that you already own, you should always contact compliance to discuss what to do. |
| vadklim | To robkaz: "... she happened to purchase a few shares of a firm that are on Bear's RESTRICTED LIST ..." |
| JepTang | My understanding is that, she purchased the securities a few days ahead of the circulation of the restricted list. |
| dmadra | Shouldn't matter as once the restricted list comes out, she must wind up her shares (even if purchased before the lst comes out). I know this from dealings with Accounting firm employees. They often hold shares in a company before their firms becomes the auditor...once their firm gets the gig, the employee can no longer hold the securities. |
| Lambo83 | Answer A is virtually the same as answer B. The sanctions (of answer A) could have included the unwinding of the position amongst other penalties |
| harrybay | Yeah but CFAI recommends to go straight to compliance because your supervisor will probably tell you to go see compliance. |