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FRM Part I · FRM Exam Part I · GARP Code of Conduct

A GARP member manages risk for an asset manager and learns, through a client engagement, of a confidential pending acquisition that is not public. A friend asks whether he should buy shares of the target. Which response is consistent with the GARP Code of Conduct?

He must not disclose or use the confidential acquisition information for anyone's benefit. The Code bars improper use of confidential information, so hinting, sharing under a secrecy promise, or trading through a relative's account are all violations.

  1. ATell the friend to buy only a small position to limit the exposure
  2. BGive no hint of the information and not use it for personal or others' benefitCorrect
  3. CShare the information if the friend promises to keep it secret
  4. DTrade on it only through a family member's account

Explanation

Members must not use confidential information for personal benefit or that of others and must not disclose it improperly. Sizing the position, getting a promise of secrecy, or using a relative's account all still misuse or disclose the information.

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