Christy Pasley, CFA, is the Chief Investment Officer for Risen Investment Funds (RIF) a mutual fund organization. At a meeting between Homeland Builders (HB), a publicly traded company, Pasley learns HB sales are much slower than expected. In fact, HB sales declined more than 20% in the last quarter, but this information has not yet been widely disseminated. Immediately after meeting with HB, Pasley purchases put options on HB stock. Subsequently, HB issues a press release with their most recent sales figures. Has Pasley most likely violated the CFA Institute Standards of Professional Conduct?
A is correct, as members and candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information. Even though the information is disclosed in a meeting with the mutual fund, this has not made the information public and it should not be used until it is more widely disseminated. It does not matter that the securities purchased are options rather than stocks.