- CFA Exams
- CFA Level I Exam
- Study Session 1. Ethical and Professional Standards
- Reading 3. Guidance for Standards I-VII
- Subject 5. Standard II (A) Material Nonpublic Information
CFA Practice Question
There are 361 practice questions for this study session.
CFA Practice Question
Hilary Waters, a CFA charterholder, is an investment analyst who has accumulated several pieces of nonpublic information through her contacts with drug firms. Although none of the information is material, Waters correctly concluded by analyzing the nonpublic information that the earnings of one of the drug firms would be unexpectedly high in the coming year. Under current U.S. law, ______
A. Waters cannot legally invest or make investment recommendations based on this information.
B. Waters may use the information, but only after approval from a compliance officer or supervisory analyst attesting to its non-materiality.
C. Waters can use the information to make investment recommendations and decisions.
User Contributed Comments 12
|myanmar||is this because of the mosaic theory?|
|misterlim||I was thrown by the words "Under current US Law" since I am an Australian and thought this might be a trick question - sigh.|
|MFApassed||Information is non material.|
|DannyZhou||In that case, B is a safer choice, I think.|
|pdubyac||has to be both material and non-public. you are not in violation of the statutes currently if it is just one or the other (or neither!)|
|marinachow||but I think in light of "material", it is kind of subjective.
|Lamkerst123||Under the Standards it is mosaic theory. I not sure if it is still so under current US law, however.|
|zzhumanov||for totally be sure that information material or nonmaterial, in my opinion, analyst should check it with compliance officer|
|gill15||I chose B as well but thats not a requirement. If I say its non material and I'm a CFA then whose to say otherwise....oh wait..I mean a CFA candidate...wait again....CFA Candidate Level I...
two of those are wrong people...be specific...
|gill15||Wait. Looking at this completely wrong. This has to do with Investment Research Reports --- With non public info if combined you can end up with material information. You dont need to make this public, you can give this to your clients....has nothing to do with compliance officers...this is our job as Investment Analysts...Read about Investment Research Reports in the text....you'll understand
|DPBass88||I learned if you If you try to go "conservative" in ethics you will fail. The key to this question is that it states "Although none of the information is material" and again. I dont think U.S law is relevant because under the CFA standards insider trading is not allowed no matter which law you're under.|