CFA Practice Question
CFA Practice Question
Barron is an analyst for a major stock brokerage firm with its main office in Boston. He is based in a developing country with a rapid pace of liberalization. Local corporate laws, including securities laws, are in a nascent stage and include no severe legal provisions against insider trading. Barron should ______
A. provide advice to clients in the same manner as he would in the U.S.
B. provide advice to clients recognizing that in such a market, timely access to information may be inhibited.
C. disregard CFA Institute Code and Standards relating to insider trading as long as it is considered legal in the developing country.
Explanation: Barron should bear in mind that a small market and the absence of a fairly regulated flow of information to the market presents certain risks to his ability to obtain information and make timely decisions. He should include this factor in formulating his advice to clients. In handling material nonpublic information that accidentally comes into his possession, he should follow the Code and Standards.
User Contributed Comments 11
|antony||B sounds like it is condoning insider trading. Inform clients that timely access to information may be inhibited so do whatever is necessary to gain an edge.|
|Mago||nascest? I am not familiar with that word...Gosh!|
|Janey||Nascent means in the beginning or developing stage|
|dealsoutlook||b is insider trading since he would have access to efficient market information and can trade based on that to make gains in the inefficient market.|
|steved333||A seems more correct, as the CFA code is stricter vis a vis insider trading. Therefore, since you would follow that in the US, it would make sense that you would do the same there...|
|manstey||USA USA USA. silly question|
|Kashi2010||I interpreted 'B' as meaning that he should recognise deficiencies in the market (i.e. insiders may be trading before info is public) in formulating research opinions and recommending them to clients, which I believe is correct. As such providing advice in the same manner as in the US would be inappropriate.
Obviously the stricter of local/home/CFAI rules should always be employed.
|zeen1||first they should mention he is a CFA and where is it written local/home/CFAI.. All i read was local or CFA... Also there was a similar question in the Qbank where instead of the home country law which was more strict than CFAI or the practicing country of the analyst, the correct answer was local or CFAI...|
|tommyguard3||The explanation is almost exactly B. He should recognize the inefficiency in the market and take this into consideration when providing advice. While he should follow the stricter rules he cannot provide the same advice as there are a unique set of risks that his clients need to be aware of.
The explanation makes me think this is an error and that the correct answer should be B.
|alles||I agree with tommyguard. And I don't agree with A. He should follow the stricter of local laws or the CFA Standards, which is this case would be the standards.|