Ethical and Professional Standards Q72

72Isaac Dobrogost, a candidate in the CFA Program, works as an investment advisor for Zenith Mutual Fund. He is invited by one of his clients, Sahara Inc. (SI), a manufacturing company, to meet with the finance director along with a few large stakeholders of SI. In the meeting Dobrogost finds out that the company is going through a lean period and will announce a decrease in earnings in their next quarter financial results. Can Dobrogost use this information to change the rating of the company from “buy” to “sell”?

Option : A
Explanation : If the information is not publicly disseminated by the company and Dobrogost uses it, then it becomes material nonpublic information, hence a violation of Standard II(A). A small group of stakeholders does not qualify as the public. He cannot use the information.

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