Carla Tonis is an investment analyst at Target Investments, Inc (Target), an investment management firm that helps recent college graduates start investing in the stock market. Tonis wants to earn the CFA designation and has passed the Level I CFA exam. She plans to take the Level II exam a year from now but has not enrolled in the next scheduled exam. She is also a member of CFA Institute.
A group of graduates from one university have been so happy with Tonis’s investment advice they made her an honorary member of their alumni association which includes nonmonetary benefits. They recently gave her complimentary tickets to a major athletic event of the school and allowed her to stay at the school’s alumni house for free. While at the athletic event, Tonis overhears two alumni as they discuss plans for their firm to begin marketing a major new product that should be very profitable for the firm. From the context of what Tonis overhears and knows, she concludes that this is nonpublic information. Tonis believes she is the only one to hear the discussion. She knows a mutual fund that has a large holding in the firm. It is a mutual fund that she has often recommended to her clientele.
With respect to the information that Tonis overhears at the sporting event, she:
A) may not act on the information.
B) may not act on the information and must try to achieve public dissemination of the information.
C) may trade on the information using the mutual funds she has been already been using only.
My question — why achieving public dissemination of the information is not required — we must achieve public dissemination of material non-public information—- I did not understand.
Explanation is below:
According to Standard II(A), Members and Candidates cannot trade or cause others to trade on material nonpublic information. Although recommended, she is not required to make reasonable efforts for public dissemination of the data.
See, here we need to distinguish between “recommended” and “requirement”. Tonnis is recommended to achieve public dissemination but is not under any obligation or requirement to do so.
The language of the option states that she “must” try to achieve public dissemination of the information – which in turn is a hard language, in line with the “requirement” of disemmination.
A softer language, hinting recommended would’ve been ” may not act on the information and should try to achieve public dissemination of the information”.