Edward, CFA, heads the settlement department of a fund management company. His wife, Fiona, works for an investment bank. Edward accidentally overhears an acquisition deal that Fiona is working on. The deal is soon to be closed and announced publicly. Edward checks subsequently neither the stock of the target company nor its call option falls in the restricted list of his employer. To maximize the upside, he buys the call option but he loses money on it because it coincides with the market plunge due to rising interest rate. A) Please discussion the following: Which CFA Standard of Professional Conduct does 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. Edward's purchase of the call option is: I. acceptable because he is just working in the settlement department, but not the investment department, of the fund management company. II. acceptable because he is not making money on the trade. III. acceptable because he is only buying the call option of the target stock, not the stock itself. IV. unacceptable.
Edward, CFA, heads the settlement department of a fund management company. His wife, Fiona, works for an investment bank. Edward accidentally overhears an acquisition deal that Fiona is working on. The deal is soon to be closed and announced publicly. Edward checks subsequently neither the stock of the target company nor its call option falls in the restricted list of his employer. To maximize the upside, he buys the call option but he loses money on it because it coincides with the market plunge due to rising interest rate. A) Please discussion the following: Which CFA Standard of Professional Conduct does 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. Edward's purchase of the call option is: I. acceptable because he is just working in the settlement department, but not the investment department, of the fund management company. II. acceptable because he is not making money on the trade. III. acceptable because he is only buying the call option of the target stock, not the stock itself. IV. unacceptable.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
Related questions
Question
![Edward, CFA, heads the settlement department of a fund management company. His wife, Fiona, works for
an investment bank. Edward accidentally overhears an acquisition deal that Fiona is working on. The deal
is soon to be closed and announced publicly. Edward checks subsequently neither the stock of the target
company nor its call option falls in the restricted list of his employer. To maximize the upside, he buys the
call option but he loses money on it because it coincides with the market plunge due to rising interest rate.
A) Please discussion the following:
Which CFA Standard of Professional Conduct does 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.
Edward's purchase of the call option is:
I. acceptable because he is just working in the settlement department, but not the investment department, of
the fund management company.
II. acceptable because he is not making money on the trade.
III. acceptable because he is only buying the call option of the target stock, not the stock itself.
IV. unacceptable.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F60cd2f3b-14de-4127-808b-98b652e2dc68%2F9a54ed1c-4249-4dad-a491-fae5ea6c2217%2F5ksf4wh_processed.png&w=3840&q=75)
Transcribed Image Text:Edward, CFA, heads the settlement department of a fund management company. His wife, Fiona, works for
an investment bank. Edward accidentally overhears an acquisition deal that Fiona is working on. The deal
is soon to be closed and announced publicly. Edward checks subsequently neither the stock of the target
company nor its call option falls in the restricted list of his employer. To maximize the upside, he buys the
call option but he loses money on it because it coincides with the market plunge due to rising interest rate.
A) Please discussion the following:
Which CFA Standard of Professional Conduct does 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.
Edward's purchase of the call option is:
I. acceptable because he is just working in the settlement department, but not the investment department, of
the fund management company.
II. acceptable because he is not making money on the trade.
III. acceptable because he is only buying the call option of the target stock, not the stock itself.
IV. unacceptable.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Understanding Business](https://www.bartleby.com/isbn_cover_images/9781259929434/9781259929434_smallCoverImage.gif)
Understanding Business
Management
ISBN:
9781259929434
Author:
William Nickels
Publisher:
McGraw-Hill Education
![Management (14th Edition)](https://www.bartleby.com/isbn_cover_images/9780134527604/9780134527604_smallCoverImage.gif)
Management (14th Edition)
Management
ISBN:
9780134527604
Author:
Stephen P. Robbins, Mary A. Coulter
Publisher:
PEARSON
![Spreadsheet Modeling & Decision Analysis: A Pract…](https://www.bartleby.com/isbn_cover_images/9781305947412/9781305947412_smallCoverImage.gif)
Spreadsheet Modeling & Decision Analysis: A Pract…
Management
ISBN:
9781305947412
Author:
Cliff Ragsdale
Publisher:
Cengage Learning
![Understanding Business](https://www.bartleby.com/isbn_cover_images/9781259929434/9781259929434_smallCoverImage.gif)
Understanding Business
Management
ISBN:
9781259929434
Author:
William Nickels
Publisher:
McGraw-Hill Education
![Management (14th Edition)](https://www.bartleby.com/isbn_cover_images/9780134527604/9780134527604_smallCoverImage.gif)
Management (14th Edition)
Management
ISBN:
9780134527604
Author:
Stephen P. Robbins, Mary A. Coulter
Publisher:
PEARSON
![Spreadsheet Modeling & Decision Analysis: A Pract…](https://www.bartleby.com/isbn_cover_images/9781305947412/9781305947412_smallCoverImage.gif)
Spreadsheet Modeling & Decision Analysis: A Pract…
Management
ISBN:
9781305947412
Author:
Cliff Ragsdale
Publisher:
Cengage Learning
![Management Information Systems: Managing The Digi…](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780135191798/9780135191798_smallCoverImage.jpg)
Management Information Systems: Managing The Digi…
Management
ISBN:
9780135191798
Author:
Kenneth C. Laudon, Jane P. Laudon
Publisher:
PEARSON
![Business Essentials (12th Edition) (What's New in…](https://www.bartleby.com/isbn_cover_images/9780134728391/9780134728391_smallCoverImage.gif)
Business Essentials (12th Edition) (What's New in…
Management
ISBN:
9780134728391
Author:
Ronald J. Ebert, Ricky W. Griffin
Publisher:
PEARSON
![Fundamentals of Management (10th Edition)](https://www.bartleby.com/isbn_cover_images/9780134237473/9780134237473_smallCoverImage.gif)
Fundamentals of Management (10th Edition)
Management
ISBN:
9780134237473
Author:
Stephen P. Robbins, Mary A. Coulter, David A. De Cenzo
Publisher:
PEARSON