CASE 6:

Ackerman is a securities contractor working to assist Superior Western Energy (SWE) list its shares on

the Australian Security Exchange (ASX). SWE filed a prospectus for an offer of up to five million shares

at $2 each to raise $10 million. The ASX listing rule applicable at the time required that entities seeking

admission to the ASX must meet a "minimum spread requirement" of at least 300 shareholders with a

minimum value holding to qualify for listing on the exchange. In their listing application, representatives

of SWE informed ASX that the minimum spread requirement of 300 shareholders had been met. These

disclosures included as shareholders 31 people or companies arranged by Ackerman. But none of the

supposed shareholders were genuine buyers of SWE securities; Ackerman had provided false names

and addresses for the investors. The SWE share offer raised more than $3.5 million, with more than

1.75 million shares being issued. SWE was admitted to the official list of the ASX, and its shares were

quoted on that exchange. Over time, the price of SWE shares steadily increased, the company attracted

hundreds of investors and shareholders, and early investors achieved an excellent investment return.

Ackerman's actions were

A. unacceptable.

B. acceptable because SWE proved to be a strong company with excellent performance.

C.

acceptable because no investors were harmed by a technical violation of ASX rules.

D. acceptable if SWE would have met the minimum spread requirement without the 31 fictitious

investors claimed by Ackerman.

CASE 11:

Greenfield is the chief financial officer of HumanaHealthMD, a biotech firm that researches, develops,

and commercializes pharmaceutical drugs for women's health issues. Humana submits a new drug

application to government regulators for a promising new drug for treating hormone deficiency. Two

meetings scheduled with regulators to discuss the drug are postponed when the regulator states that

unspecified deficiencies with the drug make such discussions premature. The public announcement of

each meeting postponement results in a decline of more than 10% in the company stock.

When the meeting between regulators and company executives finally happens, Humana presents

yet-to-be published preliminary test data with favorable indicators for the drug. The regulators react

positively and give Humana preliminary regulatory approval contingent on further studies. After the

meeting, six sell-side research analysts covering Humana inquire with Greenfield about the meeting.

Greenfield responds by email and indicates that he believes the meeting with regulators was "very

positive and productive" and that the company was "pleasantly surprised" by the reaction of the

regulators. Greenfield does not share the favorable preliminary test data with the analysts. After the

emails to the analysts, the stock price of the company increases 19%. Greenfield's actions are

Disclosures - Case 11

A.

appropriate because Greenfield does not share the unpublished preliminary test data with the

analysts but restricts his comments to the general tenor of the meeting.

B.

appropriate because Greenfield responds to questions from research analysts covering the

company.

C.

appropriate because Greenfield communicates with all six research analysts covering the

company.

D. inappropriate.

E. none of the above.

CASE 15:

Antron is a commodities trader for a regional bank. He often places customer orders for precious metal

futures contracts. Then shortly after placing a customer order, he will place a significantly larger order

on the other side of the trade for his personal account. So for example, when a customer order is a "sell"

order, Antron places a much larger "buy" order from his personal account. Typically, Antron's orders for

his personal account are placed slightly lower than best price, reducing the likelihood of his order being

filled immediately. As soon as the customer order is executed, Antron cancels his personal trade order.

Antron's actions are

Investments and Trading - Case 15

A.

unacceptable.

B.

acceptable because his clients' trades are always executed prior to his personal trades.

C.

acceptable if he discloses that he is engaging in a trading strategy for his personal account

that is opposite that of his client account.

D.

acceptable because he is acting in the best interests of his clients.

E.

none of the above.

CASE 16:

Cho, an accountant in a fund management company, lives with his fiance Wang, an investment banker

with a global bank. In view of their proximity, Wang cautioned Cho that her work involves confidential

material and advised him not to divulge what he may pick up from her work to anyone.

During a weekend holiday, Cho overheard an acquisition deal which Wang was working on. He decided

to buy small quantities of the derivatives of the target stock instead of the stock of the target company.

The profit from the transaction would help defray expenses of their impending marriage. Both the

derivative and the stock did not come under the restricted list of Cho's employer; and Cho was not yet

married to Wang. He went ahead with the purchase, but to his disappointment, the transaction netted

him a loss instead. Cho's actions are

Investments and Trading - Case 16

A.

acceptable because he bought the derivatives instead of the stock.

B.

acceptable as long as he does not divulge the acquisition information to others.

C.

acceptable only because he suffered a loss.

D.

acceptable because he is merely engaged to Wang.

E.

none of the above