CFA Level I · CFA Level I Exam · Guidance for Standard II: Integrity of Capital Markets
An analyst posts several online messages containing exaggerated, unsupported claims about a thinly traded company's prospects. After the share price rises, the analyst sells his personal holding. His actions are most likely:
The analyst most likely violates Standard II(B). Issuing exaggerated, misleading positive claims to lift a price and then selling at the inflated level is information-based manipulation, often called pump and dump. Thin trading offers no defense, and disclosure of a holding does not cure misleading statements.
- Apermitted, because the analyst's personal holding was disclosed
- Ba violation of Standard II(B) as information-based manipulationCorrect
- Cpermitted, because the company's shares are thinly traded
Explanation
Standard II(B) prohibits spreading misleading positive information to pump up a price and then dumping the investment. The analyst's conduct fits this pattern. Thin trading does not excuse it, and no disclosure was described that would cure the misleading content.
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