"morality" exercise:Market Manipulation

A is correct as soliciting the bank’s client did not violate Standard IV(A)–Loyalty because the manager is no longer an employee of the bank and there is no indication she obtained the client information from bank sources. The member, however, has violated Standard V(C)–Record Retention, because when she left the bank she took the property of the bank without express permission to do so. In addition, the analyst violated Standard I(C)–Misrepresentation by creating research materials without attribution, which is demonstrated when the manager adds to the new report a real estate study she saw in the Wall Street Journal, referencing the Journal only. In all instances, a member or candidate must cite the actual source of the information. If she does not obtain the report and review the information, the manager runs the risk of relying on second‐hand information that may misstate facts. Best practice would be either to obtain the complete study from its original author and cite only that author or to use the information provided by the intermediary and cite both sources.

B is incorrect because according to Standard V(C)–Record Retention, when a member or candidate leaves a firm to seek other employment, the member or candidate cannot take the property of the firm, including originals or copies of supporting records of the member’s or candidate’s work, to the new employer without the express consent of the previous employer.

C is incorrect because the analyst violated Standard I(C)–Misrepresentation by creating research materials without attribution, which is demonstrated when the manager adds to the new report a real estate study she saw in the Wall Street Journal, referencing the Journal only. In all instances, a member or candidate must cite the actual source of the information. If she does not obtain the report and review the information, the manager runs the risk of relying on second‐hand information that may misstate facts. Best practice would be to either obtain the complete study from its original author and cite only that author or to use the information provided by the intermediary and cite both sources.

C is correct because the member has engaged in information-based manipulation of Road stock in violation of Standard II(B)–Market Manipulation and Standard I(D)–Misconduct. Members and candidates must refrain from “pumping up” (or down in this case) the price of an investment by issuing misleading positive (negative) information for their or their clients’ benefit. The member has not violated Standard VI(B)–Priority of Transactions because this concerns client investment transactions having priority over member or candidate investment transactions and is not applicable here.

A is incorrect because Standard I(D)–Misconduct, has been violated. The member should not manipulate the market! The premature use of the information is secondary, while the market manipulation is primary.

B is incorrect because Standard II(B)–Market Manipulation, has been violated. The member should not manipulate the market! Premature use of the information is secondary, while the market manipulation is primary.