NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
An adviser learns, through a corporate client engagement, of an unpublished merger announcement that will affect a listed company's share price. Which action is consistent with ethical and regulatory standards?
The adviser should not use or share the unpublished price sensitive information and should follow the firm's confidentiality, restricted-list and information barrier procedures. Trading personally, through relatives, or tipping clients or colleagues would amount to insider trading.
- ANot use the information for advice or trading and follow the firm's confidentiality and restricted-list proceduresCorrect
- BAdvise only favoured clients to buy before the announcement
- CBuy shares in a family member's name before the announcement
- DShare the information with other advisers informally as a courtesy
Explanation
Unpublished price sensitive information must not be used or communicated for trading. The adviser should keep it confidential and follow the firm's restricted-list and information barrier controls. Trading through relatives or tipping others is still insider trading.
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