"morality" exercise:Additional Compensation Arrangements

C is correct because prior clearance processes guard against potential and actual conflicts of interest; members are required to abide by their employer’s compliance procedures [Standard VI(B)].

A is incorrect because Covington did violate the Standards in that she did not follow her employer’s compliance procedures [Standard VI(B)].

B is incorrect as there is nothing to indicate she violated Standard V(A)–Diligence and Reasonable Basis.

B is correct because Kato exaggerated the potential for negative price movement with rare earth metals and violated Standard II(B)–Market Manipulation by aiming to profit on the volatility created by his actions. Standard II(B) requires that members and candidates uphold market integrity by prohibiting market manipulation. Market manipulation includes the dissemination of false or misleading information and transactions that deceive or would be likely to mislead market participants by distorting the price-setting mechanism of financial instruments. Standard IV(B)–Additional Compensation Arrangements was violated when he sold his report to the internet site. Standard VI(B)–Priority of Transactions has not been violated as it relates to investment transactions for clients and employers having priority over Member or Candidate transactions.

A is incorrect because Kato exaggerated the potential for negative price movement with rare earth metals and violated Standard II(B)–Market Manipulation by aiming to profit on the volatility created by his actions. Standard II(B) requires that members and candidates uphold market integrity by prohibiting market manipulation. Market manipulation includes the dissemination of false or misleading information and transactions that deceive or would be likely to mislead market participants by distorting the price-setting mechanism of financial instruments.

C is incorrect because Standard IV(B)–Additional Compensation Arrangements was violated when he sold his report to the internet site.