Laws & RegulationsQuestion 91 of 110
Which activity constitutes a prohibited misuse of material nonpublic information?
a.Recommending a stock based on published research reports
b.Reviewing a company's public annual report
c.Trading on confidential inside information before it is released to the public
d.Discussing widely reported market news with a client
Explanation
Trading on material nonpublic (inside) information, or tipping others to do so, is insider trading and is strictly prohibited under federal securities law. Advisers must maintain policies to prevent the misuse of such information. Using publicly available research and news, by contrast, is entirely permissible.
Law Reference: Investment Advisers Act of 1940Practice all 110 questions free — no signup required.
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