CFA Practice Question

CFA Practice Question

Brad Davis is an analyst who covers the technology stock IP Networks. Davis is concerned about the liquidity situation of IP that could lead to bankruptcy, while also believing that IP could announce a technological breakthrough that would substantially increase its stock price. During a golf game, Davis' golf partner mentions that IP will likely make the technological breakthrough soon. Davis returns from the game, discusses IP with co-workers and proceeds to purchase IP stock for his clients' accounts.
A. Davis and his co-workers have both violated Standard II (A) Material Nonpublic Information.
B. Only Davis has violated Standard II (A) Material Nonpublic Information.
C. No violation of Standard II (A) Material Nonpublic Information.
Explanation: Source of information not reliable and hence information cannot be considered material.

User Contributed Comments 5

User Comment
Confucion How would be golf partner know if he/she wasn't "in the know". Further, if they were "in the know", wouldn't that then be MNPI and anyone acting on the information would then be in voilation of insider trading?
Mikehuynh Don't like this answer from Analystnotes
ninad123 I think Analyst Notes is correct, suppose your Dentist Gives u a Tip on a Stock, That is not Material Info, If you act on it you violate Deligence and Reasonable Basis :)
blink78597 if you specify it a dentist it would make it more clear. Golf in my mind is more of a business activity, maybe over thinking but if the point is material vs non material, give me a different sport than golf.
sunday128 I agree with blink...
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