Ethical and Professional Standards Q64

64Nick Nader, CFA, works as a trader for Trust Investment Bank. During lunch he receives a phone call from a longtime friend Chris Sandler, who is a trader at SYI Securities. Sandler talks about various market rumors and tells Nader about a software company which is going through merger talks with another company in the same industry. Nader has a large purchase order from his portfolio manager for this stock. He searches various internet reports and the software company‟s website but finds no such news of the merger. Upon returning to his desk he places the order aggressively and completes it by the next day before the company releases any information. Has Nader violated any Standard?

Option : A
Explanation : Nader did not violate any Standard. There are always rumors in the market, before an official release by the company. Unless Nader knew that Sandler was in a business relationship with the merger companies, there was no reason to suspect that he was receiving nonpublic material information.

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