In researching EnergyAlgae, Tang finds that potential customers and suppliers of EnergyAlgae are highly skeptical of the claims made regarding the company’s respective products. She also contacts several energy companies and is unable to locate anyone who has even heard of EnergyAlgae. When Tang reviews CleanTech’s trading activity in EnergyAlgae shares, she finds that CleanTech liquidated its position in EnergyAlgae soon after CleanTech’s portfolio managers presented positive views on EnergyAlgae in a number of media interviews. In addition, many of CleanTech’s employees also sold their shares in EnergyAlgae immediately after CleanTech sold its shares of the company. The share price of EnergyAlgae dropped dramatically after the stock sales made by CleanTech and its employees.
The EnergyAlgae trades are least likely to have violated the CFA Institute Standards of Professional Conduct with regard to:
A.the order in which the shares were traded.
B.the adverse and skeptical opinions of EnergyAlgae products.
C.share price distortion because of positive media presentations.
解析答案为什么选A?
A Correct. The hedge fund had priority in trading the stock ahead of employees. The hedge fund is effectively the client. But it does not alleviate the stock price manipulation that was engaged in by the fund and its employees, a violation of Standard II(B)–Market Manipulation. In addition, there does not appear to be an adequate basis for recommending the stock (i.e., negative information on the company’s products from potential customers and suppliers), a violation of Standard V(A)–Diligence and Reasonable Basis.
B Incorrect because there does not appear to be an adequate basis for recommending the two stocks in violation of Standard V(A)–Diligence and Reasonable Basis
C Incorrect because both the hedge fund and its employees have engaged in practices that distort prices in violation of Standard II(B)–Market Manipulation. This appears to be a classic “pump and dump” fraud where worthless stock is promoted to the public and once it reaches a certain price level the insiders who helped boost the share price sell off their shares, leaving other investors holding stock that has little or no value.