Ethical Decision on Insider Information

Very Hard Cfa Institute Code And Standards Professionalism - Law Knowledge

A financial analyst is reviewing potential investment opportunities for a private equity firm. During the review process, the analyst receives non-public financial data from a colleague who works at a company being considered for investment. The colleague emphasizes that sharing this information is common practice among industry players, and he indicates that it shouldn't be a concern as he believes it will benefit both firms involved. The analyst is aware of the CFA Institute's Code of Ethics and Standards of Professional Conduct, which requires members to maintain the integrity of information and uphold the highest ethical standards.

Considering the situation, which of the following actions by the analyst best adheres to both the CFA Institute's Code and applicable laws regarding insider trading?

The analyst decides to use the non-public financial data for making investment recommendations, believing the market would benefit from this valuable insight.

The analyst declines to use the non-public financial data and reports the colleague's actions to the compliance department of the private equity firm.

The analyst speaks with other colleagues to verify the legitimacy of the data before deciding whether to use it or not.

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