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Basic Question 10 of 15
You participate in a conference call for analysts following XYZ. During the call, the CEO of the firm reveals that EPS will be 20% below previous expectations.
B. You should inform clients with a position in XYZ as soon as possible.
C. You can never trade on this information because it is inside information.
A. You should refrain from trading until the information is more broadly disseminated.
B. You should inform clients with a position in XYZ as soon as possible.
C. You can never trade on this information because it is inside information.
User Contributed Comments 21
| User | Comment |
|---|---|
| kalps | Participants = select gorup, therefore should refrain from acting on this information |
| eheinzer | I thought a conference call for analysts is public? That was mentioned in answers before? |
| suzc | I also taught a conference call for analysts is public? |
| fuller | it's not public as only selected people know the news, not the general public. |
| examinee | But the selected people represent the public. In most questions if info is disemminate in calls it is treated as public. |
| Arron | Conference call for Analysts is public, I think. |
| TheProfet | While I do agree that there can be confusion surrounding the fact pattern, I find it hard to accept a 'group of analysts' as being representative of the public. I think that 'A' has to be the best answer simply because (1) the 20% shortfall in EPS is material and (2) if the everyday investor (i.e., someone who watches CNBC or gets WSJ email news flashes) doesn't know this information, the analyst that knows this information cannot trade, or cause others to trade using such information. |
| DonDon | What about C? The information is still non-public material information. |
| Slothrop | The official CFA material says, "Analysts must be aware that a disclosure made to a room full of analysts does not necessarily make the disclosed information "public". |
| MattyBo | Slothrop is right. Room full of analysts does not constitute the "public" per CFA material. |
| xcye | QUARTERLY conference call for analysts is public because this is the earnings call that every public company conducts. Just a conference call for analysts might not be necessary public. |
| Yurik74 | DonDon - also thaought about C but never is too much, I think. When info becomes public - you may trade |
| midwest | i agree with xcye. although quarterly conference calls are public information and are widely available via most financial websites or directly through the company's website, the questions specifically states "conference call for analysts", which would make selection A the best answer. however, if anywhere in the question, it stated "public" conference call, i would think that C would be acceptable. |
| ggupta | Yes, Conference Call for any specific group is considered non public information .. |
| wundac | Thanks xcye for clarifying the issue of public versus non public. Makes sense now. |
| AUAU | How about "never trade" in "C"??? It may be trade after made public. |
| ljamieson | Don't do anything until you see it on the 6pm news is a little rediculous. |
| josie491 | Need to understand the definition of "broadly disseminated" - does this mean that when it is released publicly? or "broadly disseminate" to other analysts - which mean information is still non-public. |
| raffrobb | A drop in 20% EPS! Better hope its widely disseminated real soon. BTW, I got that one on fist try. Getting the BEST Ethics answer can be dicey. I almost picked C. |
| dbedford | I think the definition of material is also defined by who is giving the info. In a prior question a rep who may be far down the food chain gave the info to the CFA = not necessarily material because investors arent likely to act on what a rep said to be true, but on the other hand as in this case, if the CEO says it then people are definitely going to buy or sell on that. This isnt, in my mind, about the analyst conference call being public or not, but who is saying it and whether investors are likely to act based on who said it. |
| UcheSam | The phrase “..more broadly disseminated” sold me out to choosing option C, although it is the wrong option on further review. However, I should have known that “never” in option C is too weighty as the information can be traded on when made public. As a pointer, the person desseminating information to Analysts either at quarterly call or any other call seriously determines whether the passed information is public or non-public. If it is the CEO or CFO, it tends to be non-public information. If it is a public relation representative (or any other in such capacity) of the issuing company, then it tends to be public information. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity
recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct
identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards
CFA® 2024 Level I Curriculum, Volume 6, Module 3.