Standard II: Integrity of capital markets Flashcards
What are the two sub-standard in standard II: Integrity of capital markets? P
Standard II(A): Material non-public information Standard II(B): Market manipulation
What does standard II(A) require?
Members who possess material non-public information must not act, or cause others to act, on the information
What is material information?
Information that if disclose would have an impact on the price of a security, or if investors would want to know the information before making an investment decision
What is nonpublic information?
All information is non-public util it has been publicly disseminated or is available in the marketplace generally. Information made available to analysts IS non-public, until made available to society generally
What does the mosaic theory allow?
Mosaic theory allows analyst to use public, non-public non-material information when making investment recommendations and conclusions, even if these conclusions would have material inside information if communicated directly
Can research reports be treated as nonpublic material information?
No - assuming the analyst is not a company insider and has drawn their conclusions under the mosaic theory
Is material nonpublic infomration given to a family member okay?
No > the fact that the info is given to a family member does not absolve someone of communicating or trading non public information
What does standard II(B) require?
Relates to market manipulation
Requires: don’t engage in practices hat artificially inflate trading volume or distort prices with the intent to mislead
What is information and transaction based manipulation?
Information based: Spreading false rumours to induce trading by others
Transaction based: Where trading actions affect the price of a security
