ethics

[nitinsiwach]

If you tell your colleague about the recommendation that you are about to print in report next week and he doesnt act on it, have you made a violation?

 

[shootforthestars1]

Depends entirely on what the colleague does. If he’s a member of research team and part of either of teh following then no it’s not -
- report preparation
- data analytics for the reprot
- fact checker/reviewer
- supervisor
If he’s not a member of research team, it may violate Fair Dealing clause of the standards, as he may now have an unfair advantage over other susbcribers of his research report to trade on that info.

 

[nitinsiwach]

He is not a member of the research team and has got hte information but doesnt act on it. is it still a violation?

 

[shootforthestars1]

^Again, your question lacks critical details, but I can see why you’re asking this question
It depends entirely on the type of firm (his employer), whether the recepients of this report are clients or just counterparties, whether they have a fiduciary responsibility or not, and/or whether this a subscriber-provider type service paid for by all recepients of the report.
Simply put, he MUST ensure nobody gets an unfair advantage - however, if he’ss an independent researcher, with not contractual client, fiduciary obligations, then IMO he’s free to share it selectively with one person first and then release it to the world.
However most questions in CFA books will be when the recepient is a client and the research analyst works at a bank/fund/ratings agency, in which case it violates fair dealings clause and is a violation, as he’s given extra time to his colleague to prepare a strategy on how to “play” the markets once the report is release (unfairly advantaged)

 

[onlysimon]

nitinsiwach wrote:
He is not a member of the research team and has got hte information but doesnt act on it. is it still a violation?

yes.
you must limit the number of people who have access to the information (need to know basis).
if the report was a “hold/market perform” then you would expect him not to act. another recommendation might have given a different result.
violation for sure.