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- Topic: Maybe a misleading answer the one provided by test engine
| Author | Topic: Maybe a misleading answer the one provided by test engine |
|---|---|
| patas @2004-01-20 20:17:34 |
This is the question:
You have a friend who works as a legal advisor to a firm which is about to be acquired at a significant premium to the current market price. He informs you of the upcoming acquisition and suggests that you purchase a significant number of shares. He says that while he is an insider, you can trade on the information because you are not. I. You cannot trade on the information because it is material and non-public. II. You can trade on the information because you are not an insider. III. You cannot trade on the information because your friend has breached fiduciary duty. According to the exam engine the correct answer would be to choose I & III. Which they they seem to me contradictory to one another. Please help me to figure out this one. Thanks! |
| Peter83 @2004-01-20 21:03:22 |
I don't see why the answer is misleading. |
| Ebenezer @2004-01-25 10:34:05 |
It is because of the way the information has been obtained-from someone who has breached fiduciary duty-this immediately triggers trading restrictions. There is no doubt that the information is material and non-public.
Say, if the information was overhead in a conversation-then there is no issue of breaching fiduciary duty. Pls correct me if I am wrong! |
CFA Discussion Topic: Maybe a misleading answer the one provided by test engine
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