ANALYST vs. ANALYST

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gomumia

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Listen there is some confusion whether a conference call for analysts or analysts' briefing is a forum that can be treated as a public one or not. Personally i believe it's not but hope to receive some useful anwers. Thx a lot
 
Schweser says that a conference call is NOT public disclosure.
 
This is for the material, non-public info thing. From the ethics manual -

"Members and candidates must be particularly aware of information that is
selectively disclosed by corporations to a small group of investors, analysts, or other
market participants. Information that is made available to analysts remains nonpublic
until it is made available to investors in general. Corporations that disclose
information on a limited basis create the potential for insider-trading violations.
Issues of selective disclosure often arise when a corporate insider provides
material information to analysts in a briefing or conference call before that
information is released to the public. Analysts must be aware that a disclosure
made to a room full of analysts does not necessarily make the disclosed information
�public.� Analysts should also be alert to the possibility that they are
selectively receiving material nonpublic information when a company provides
them with guidance or interpretation of such publicly available information as
financial statements or regulatory filings." pg. 38

So according to CFA Institute, if you attend a briefing or a conference call you have a problem trading the stock. I guess that corporations ought to stop providing guidance this way. (More CFAI idiocy)
 
Thanks for such a quick answer, so getting back to the problem which i believe is now solved what do you think about this?

Gains a financial analyst for XYZ is told by the investor relations representative for Firebird Avionics, a major aircraft manufacturer, that the firm is in the final stages of building a new fuel efficient jet engine. This information is divulged by Firebird at the most recent quarterly conference call for analysts. In a research report Gaines uses this information along with other information he obtained from the company distributed to the public in a research report that includes a "buy" recommendation for Firebird stock. Which of the followin statements is true? So we have

A. Gaines violated CFA Institute's Standards od Professional Conduct because he used material inside information
B. Gaines violated CFA Institute's Standards od Professional Conduct because he has a material misrepresentaion in his report
C. Gaines violated CFA Institute's Standards od Professional Conduct because he failed to separate opinion from fact
D. Gaines' actions didn't violate CFA Institute's Standards od Professional Conduct

so what do you think about that?
 
I suppose it is A because he is causing others to act on material nonpublic information. Despite the SEC's and CFAI's most intrusive fantasies, no court would ever find that Gains did anything wrong (Dirks would would speak directly to this).
 
to my astonishment D is said to be the right answer which i hound really weird that's why i asked about that conference for analysts cause i don't know whether there's something wrong with CFA or i'm going mad
 
Wow.

Nothing like an ethical system that is so convoluted that you can't figure it out while looking at the manual.
 
I think D is the right answer. Refer to the Mosaic Theory.
 
The mosaic theory is a really lousy defense when you're in possession of insider information.
 
I would've said A also, but I guess using the mosaic theory, you come up with D. But again, if a conference call isnt defined as public disclosure, than A is the answer.

Good to know four people and the answer key cant get on board with one answer
 
If it's the mosaic theory then the information that the company has a new fuel efficient jet engine must be nonmaterial. The handbook says that among the pieces of info CFAI considers material is "innovative products, processes or discoveries" so this doesn't seem right.



Edited 1 time(s). Last edit at Wednesday, October 4, 2006 at 11:59AM by JoeyDVivre.
 
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