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

A risk manager at an asset manager receives a nonpublic report on an upcoming merger of a listed company in which the manager's relatives hold shares. Which course of action is consistent with the GARP Code of Conduct?

The risk manager must keep the merger information confidential and not use it for personal gain or to benefit relatives. The GARP Code forbids using confidential information improperly and requires compliance with applicable laws and firm policy. Tipping relatives or delaying a trade still misuses the nonpublic information.

  1. ATell the relatives to sell only if the merger looks unfavorable
  2. BKeep the information confidential and not use it for personal or others' benefit, following the firm's policiesCorrect
  3. CShare it with relatives since no firm funds are used
  4. DTrade after a short delay so the trade is not linked to the report

Explanation

The Code requires members to keep confidential information confidential and not to use it for personal benefit, and to comply with laws against trading on material nonpublic information. Tipping relatives or delaying trades still exploits the information.

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