1.

Simone Sullivan concluded an introductory meeting with her new client, at which they reviewed the clients investment goals and experience.

The client promised Sullivan a personal fee of 5% of any gains in his portfolio by the time of their next quarterly meeting. By the time of the next quarterly meeting, the portfolio had grown such that the client handed Sullivan 1250 in cash. She celebrated by buying a new flat screen TV, and looked forward to the next quarterly meeting.

What was wrong with Sullivans actions?

The incentive rate she negotiated was too low

She should have written to her employer explaining the incentive agreement to get permission

She should not have accepted the payment in cash

She should not have accepted any incentive payment from the client, as this would encourage her to neglect other clients

2.

At a dinner party, Paola Nuttina, a research analyst for Money Brothers, meets a stock broker who shares a tip off he has had about BigOil Company.

According to this stockbroker, BigOil has just made a big find in Siberia, after poor exploration results over the past five years.

The broker is certain about the big find, because his brother is the reservoir engineer in the BigOil team responsible for the field and they spoke about this today. Hes recommending a buy to his special clients and friends. Paola had just finished her report on BigOil and had rated it a weak hold. The next morning she updates her report with an optimistic view on future earnings and changes the rating to a buy.

Which of the following is true?

She acted for the benefit of Money Brothers clients

She was acting on non-material public information

She failed to distinguish between facts and opinions in her recommendation

She failed to distinguish between facts and opinions in her recommendation, and she was acting on material non-public information

3.

Cindy Grant, a research analyst for a Canadian brokerage firm, has specialized in the Canadian mining industry for the past 10 years.

She recently read an extensive research report on Jefferson Mining, Ltd., by Jeremy Barton, another analyst. Barton provided extensive statistics on the mineral reserves, production capacity, selling rates, and marketing factors affecting Jeffersons operations. He also noted that initial drilling results on a new ore body, which had not been made public, might show the existence of mineral zones that could increase the life of Jeffersons main mines, but Barton cited no specific data as to the initial drilling results.

Grant called an officer of Jefferson, who gave her the initial drilling results over the telephone. The data indicated that the expected life of the main mines would be tripled. Grant added these statistics to Bartons report and circulated it as her own report within her firm.

What, if any, mistake has Grant made?

Grant should have withheld non-published information.

Grant has not made any material mistake

Grant plagiarized Bartons report by reproducing large parts of it in her own report without acknowledgment

Grant plagiarized Bartons report by reproducing large parts of it in her own report