CFA Practice Question

CFA Practice Question

Derrick Montana routinely invests in penny stocks and has a better than 50% batting average. He sometimes covers such stocks in his research reports for Tannon and Gannon Securities (TGS). He delays the release of his report which covers the industry so that his broker can buy a penny stock of a small firm in that industry at a reasonable price. Derrick has

I. violated Standard VI (A) - Disclosure of Conflicts as he does not disclose his conflict of interest to his clients in his report.
II. violated Standard VI (A) - Disclosure of Conflicts to the employer due to beneficial ownership of securities.
III. violated Standard VI (B) - Priority of Transactions.
A. I, II and III.
B. I and III.
C. II and III.
Explanation: Derrick did not disclose his ownership in the penny stock which had been acquired at the time of release of the report in the footnotes, and neither did he inform his employer of the conflict of interest as a result of the beneficial ownership of the penny stock. Furthermore, Derrick traded ahead of the firm's clients violating the standard on priority of transactions.

User Contributed Comments 3

User Comment
jpducros Who says he has an employer ? He can be owning a research firm.
Mariana80 I think the mention of TGS is implying he's employed by that firm.
sunday128 Second that Mariana..
You need to log in first to add your comment.