Ethics in the Investment Industry

The following information assumes that the CFA Institute Code of Ethics and Standards are applicable.

1. Mark Butler, an investment adviser, has two clients: Larry King, 60 years old, and Gabriel Lanai, 40 years old. Both clients earn roughly the same salary, but King has a much higher risk tolerance because he has a large asset base. King is willing to invest part of his assets very aggressively; Lanai wants only to achieve a steady rate of return with low volatility to pay for his childrens education. Butler recommends investing 20 percent of both portfolios in zero- yield, small-cap, high-technology equity issues. Did Butlers statements to King and Lanai violate the CFA Institute Code and Standards?

1. Neither statement violated the Code and Standards
2. Only in Kings case did Butler violate the Code and Standards
3. Only in Lanais case did Butler Violate the Code and Standards

The standard breached is (linking to correct CFA standard):

2. The mosaic theory holds that an analyst:

A. Violates the Code and Standards if the analyst fails to have knowledge of and comply with applicable laws

B. Can use material public information and nonmaterial nonpublic information in the analysts analysis

C. Should use all available and relevant information in support of an investment recommendation

The standard breached is(linking to correct CFA standard):