Reading 3: Standard 2 (Integrity of Capital Markets)

Question 1

Standard 2: Integrity of Capital Markets

Answer 1

Please do NOT try to manipulate the market so that an individual investor will buy stocks/sell stocks with your purchasing power.

Question 2

Standard 2A: Material Nonpublic Information

Answer 2

Members and candidates who possess material nonpublic information (aka private information) that could affect the value of an investment must not act or cause others to act on the information.

Recommendations for Firms:

• exercise substantial control of relevant interdepartmental communications through a clearance area
• review employee trades (to see if there is a possibility that someone cheated and gave away information)

Question 3

Standard 2B: Market Manipulation

Answer 3

Members and candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.
***The key point here is that if there is the “intent to mislead,” then the Standard is Violated.

Question 4

1

Answer 4

1