Skip to content

IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers

The finance director of an Indian listed company learns that quarterly results, not yet published, will be far better than the market expects. Which action is most consistent with her ethical responsibilities?

She should keep the information confidential and refrain from dealing until it is publicly disclosed. Unpublished price-sensitive information must not be used for personal gain or passed to relatives or selected investors, because that is insider dealing and breaches fairness to all shareholders.

  1. ABuy shares for herself before the announcement, since she has not told anyone else
  2. BAdvise close relatives to buy shares, since she is not trading personally
  3. CKeep the information confidential and not trade until it is publicly disclosedCorrect
  4. DShare the news with a few large institutional investors to build goodwill
  5. Delay the announcement until she has built a personal shareholding

Explanation

The results are unpublished price-sensitive information. A director must keep it confidential and must not trade or tip others until it is made public. Trading personally or through relatives is insider dealing, and selective disclosure to institutions gives them an unfair advantage over other shareholders.

Did you get it right without looking?

One question tells you little. A timed set on Ethical responsibilities of owners and managers shows your real accuracy, how long you take and where you lose marks.

Practise Ethical responsibilities of owners and managersFree diagnostic mock

More Ethical responsibilities of owners and managers questions