CFA Level I · CFA Level I Exam · Guidance for Standard II: Integrity of Capital Markets
A portfolio manager buys a dominant position in a thinly traded commodity-linked security to push up the price of a related derivative she holds. This conduct is best described as:
This is transaction-based manipulation. The guidance identifies securing a controlling, dominant position in an instrument to manipulate the price of a related derivative or underlying asset as a violation of Standard II(B). No false information is spread, so it is not information-based manipulation.
- Aa permitted legitimate trading strategy
- Btransaction-based manipulationCorrect
- Cinformation-based manipulation
Explanation
The guidance lists securing a controlling, dominant position in a financial instrument to exploit and manipulate the price of a related derivative or the underlying asset as transaction-based manipulation. No false information was disseminated, so it is not information-based.
Did you get it right without looking?
One question tells you little. A timed set on Guidance for Standard II: Integrity of Capital Markets shows your real accuracy, how long you take and where you lose marks.
More Guidance for Standard II: Integrity of Capital Markets questions
- Mei, a buy-side analyst, visits a retailer's stores, talks to its suppliers and reads public filings. A supplier's employee then privately t…
- Under Standard II(B), the intent of a trading action is most likely critical in determining whether a violation has occurred because:
- A CFA candidate works in a country where local custom accepts practices that undermine market fairness, and the country's standards are less…
- Under the mosaic theory, an analyst who concludes that a company's earnings will fall, based on public information and nonmaterial nonpublic…
- An analyst at an investment firm learns from a confidential conversation with a company's finance director that the company will announce a …
- A portfolio manager pays an industry expert for insights on a pharmaceutical firm's products. During a call, the expert reveals confidential…