Conflict between two Standards

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Joined: Tue Mar 15, 2016 3:31 am

Conflict between two Standards

Postby anmolvarma » Tue May 03, 2016 10:56 am

Lois McChord, CFA, a research analyst at an investment bank, covers the auto industry. McChord recently read a report on an auto manufacturing company written by Pierce Brown. Brown's report provided extensive coverage of the company's newly launched products indicating that sales volume, not yet publicly available, would raise future profits. Intrigued by the report, McChord called a senior executive at the company whom she has known personally for years. The executive gave her specific details on new vehicle sales, indicating that profits would double in the current quarter. McChord added this data to Brown's report and then circulated it within her firm as her own report. McChord least likely violated which of the following CFA Institute Standards of Professional Conduct?

Preservation of Confidentiality
»Material Nonpublic Information

Standard III(E)–Preservation of Confidentiality has not been violated. The analyst has a personal relationship with the officer of the auto company, and the officer is not a current, former, or prospective client. Therefore, there is no obligation for the analyst to maintain client confidentiality. However, the analyst did violate Standard I(C)–Misrepresentation when she represented another analyst's work as her own. In addition, the analyst violated Standard II(A)–Material Nonpublic Information by including data in her research report on sales figures, which were material and nonpublic.

CFA Level I
"Guidance for Standards I–VII"
Standard I(C) –Misrepresentation, Standard II(A)–Material Nonpublic Information, Standard III(E)–Preservation of Confidentiality

Why is my answer wrong , i marked material non public information.


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Re: Conflict between two Standards

Postby edupristine » Fri May 20, 2016 5:16 am

Hi Anmol

The preservance of confidentiality is not violated, as the data given by the senior executive is not his own confidential information that is being disclosed but of the company's information and no where in the question does it say that the senior executive is a client, just someone Mchord knew.

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