2. Merseyside Associates is an investment firm providing both advisory and investment banking services. One of Merseyside investment banking clients, MMDS (which manufactures and markets data storage products and cloud based software), wants to raise its stock price to facilitate a private offering, for which it will be using Merseyside as its placement agent. Gregory works for Merseyside Associates as an investment adviser. To assist MMDS with its plans, Gregory solicits several of his advisory clients to buy MMDS stock, and at the same time solicits other clients to sell MMDS stock, frequently effecting matched orders among his customers. For a 10-day period, these trades represented 48% of the total market volume of MMDS, and the price of the stock increased from $0.12 to $0.19 and then stabilized at $0.18 for the next several days. A) Please discussion the following: • Which CFA Standard(s) of Professional Conduct do(es) the case relate to? B) Explain whether each of I, II, III & IV below is correct or incorrect separately with respect to the relevant Standard. State the key points of the case that relate to the relevant Standard in your own words. Gregory's actions are: I. acceptable if the purchase and sale of MMDS stock fit within each of his advisory clients' Investment Policy Statements (IPS). II. acceptable because he was acting to promote the interests of his client, MMDS. III. acceptable as long as he discloses to his advisory clients Meyer Associates' investment banking relationship with MMDS. IV. unacceptable.
2. Merseyside Associates is an investment firm providing both advisory and investment banking services. One of Merseyside investment banking clients, MMDS (which manufactures and markets data storage products and cloud based software), wants to raise its stock price to facilitate a private offering, for which it will be using Merseyside as its placement agent. Gregory works for Merseyside Associates as an investment adviser. To assist MMDS with its plans, Gregory solicits several of his advisory clients to buy MMDS stock, and at the same time solicits other clients to sell MMDS stock, frequently effecting matched orders among his customers. For a 10-day period, these trades represented 48% of the total market volume of MMDS, and the price of the stock increased from $0.12 to $0.19 and then stabilized at $0.18 for the next several days. A) Please discussion the following: • Which CFA Standard(s) of Professional Conduct do(es) the case relate to? B) Explain whether each of I, II, III & IV below is correct or incorrect separately with respect to the relevant Standard. State the key points of the case that relate to the relevant Standard in your own words. Gregory's actions are: I. acceptable if the purchase and sale of MMDS stock fit within each of his advisory clients' Investment Policy Statements (IPS). II. acceptable because he was acting to promote the interests of his client, MMDS. III. acceptable as long as he discloses to his advisory clients Meyer Associates' investment banking relationship with MMDS. IV. unacceptable.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Transcribed Image Text:2. Merseyside Associates is an investment firm providing both advisory and investment banking services. One
of Merseyside investment banking clients, MMDS (which manufactures and markets data storage products
and cloud based software), wants to raise its stock price to facilitate a private offering, for which it will be
using Merseyside as its placement agent. Gregory works for Merseyside Associates as an investment adviser.
To assist MMDS with its plans, Gregory solicits several of his advisory clients to buy MMDS stock, and at
the same time solicits other clients to sell MMDS stock, frequently effecting matched orders among his
customers. For a 10-day period, these trades represented 48% of the total market volume of MMDS, and
the price of the stock increased from $0.12 to $0.19 and then stabilized at $0.18 for the next several days.
A) Please discussion the following:
Which CFA Standard(s) of Professional Conduct do(es) the case relate to?
B) Explain whether each of I, II, III & IV below is correct or incorrect separately with respect to the relevant
Standard. State the key points of the case that relate to the relevant Standard in your own words.
Gregory's actions are:
I. acceptable if the purchase and sale of MMDS stock fit within each of his advisory clients' Investment
Policy Statements (IPS).
II. acceptable because he was acting to promote the interests of his client, MMDS.
III. acceptable as long as he discloses to his advisory clients Meyer Associates' investment banking
relationship with MMDS.
IV. unacceptable.
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