CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Smith, a CFA candidate employed by Hunter Investment Counselors, Inc., provides investment advice to the board of trustees of a private university endowment fund. The trustees have provided Smith with the fund's financial information, including planned expenditures. Smith received a phone call on Friday afternoon from Murdock, a prominent alumnus, requesting that Smith fax to him comprehensive financial information about the fund. According to Murdock, he has a potential contributor but needs the information today to close the deal and cannot contact any of the trustees. Based on CFA Institute's Standards of Professional Conduct, ______

A. Smith may send Murdock the information because it is not material nonpublic information and disclosure would benefit the client.
B. Smith may not send Murdock the information, to preserve confidentiality.
C. Smith may send Murdock the information provided he promptly notifies the trustees.
Correct Answer: B

User Contributed Comments 18

User Comment
hagi10 why noy C.?
Yooo C suggests that Murdock send the information, then notify the trustees, a clear violation of trust.
danlan If smith notifies the trustees first, and get confirmation, then send information, is it correct?
kaliokale I think danlans suggestion works too
mtcfa The answer is definitely B. It can't be C because it says nothing about the trustees giving him the go-ahead to release the informtion. Simply notifying the trustees does not preserve confidentiality.
tanyak I think they key is that this is a private fund, not a public fund
Khadria Good point "tanyak". PRIVATE fund removes the possibility of "not being material nonpublic information" as an answer.
bobert The information, because it is private fund should be considered immaterial nonpublic material, which is not a violation of Standard 2A (only material nonpublic info is watched). If the question had been worded as "Smith may NOT send Murdock the information because it is material nonpublic information." would still be a wrong answer according to Standard 3E. It is strictly because of the preservation of confidentiality.
MattyBo Appendix A (page A-3) of reading. M & C owe duty to client who are the trustees in this case. Client is not just one member of board of trustees.
bmeisner This question has absolutely nothing to do with material nonpublic information you twats. "Good point "tanyak". PRIVATE fund removes the possibility of "not being material nonpublic information" as an answer." Hilarious
Shalva It may be material information, or non-material - it does not matter: You can't disclose ANY confidential information without permission from the client
cfaajay answer is B ,because Smith has sent the information to Murdock and then immediately informed the Trustees (he did'nt asked for trustees permission to disclose there confidentiatl information )..
cfatime21 Murdock can't handle the truth!
nabilhjeily private fund is material nonpublic or immaterial non public .... this has confused me
geofin Here is how the book explains the answer:
"This question relates to Standard III(A)?Loyalty, Prudence, and Care and Standard III(E)?Preservation of Confidentiality. In this case, the member manages funds of a private endowment. Clients, who are, in this case, the trustees of the fund, must place some trust in members and candidates. Bronson cannot disclose confidential financial information to anyone without the permission of the fund, regardless of whether the disclosure may benefit the fund. Therefore, answer A is incorrect. Answer C is incorrect because Bronson must notify the fund and obtain the fund?s permission before publicizing the information."

CFA Institute. Level I Volume 1 Ethical and Professional Standards and Quantitative Methods, 7th Edition. Pearson Learning Solutions. page 164.
raffrobb B is the best and obvious answer given the most conservative approach. After the fact disclosure always seems to just kick the can down the street in many situations....I can see we all getting weary here.
sshetty2 He would likely have to get signed documentation allowing him to disclose confidential information FIRST
khalifa92 it's obviously suspicious
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