Question $2$:

Later that afternoon, while getting a coffee, you bump into the company's Ethics Officer in the kitchen. The Ethics Officer tells you that although Energy employees generally maintain exceptionally high ethics standards, from time to time there are incidents that require

investigation. He tells you about a challenging incident that occurred a few years ago:

Energy was in confidential takeover negotiations to acquire a much smaller New Zealand listed electricity retailer, Zest Ltd$.$ Louisa Harrison was a young corporate analyst working for Energy at the time. Although not privy to the takeover discussions themselves, Harrison was aware of numerous meetings between executives of Energy and Zest. She was also aware that Energy was pursuing a $($confidential$)$ strategy to expand its electricity retail operations by acquiring smaller businesses.

Harrison passed information about the Energy' retail expansion strategy, as well as the meetings between Energy and Zest executives to her father, manager of the hedge fund Galaxy Capital.

Galaxy Capital subsequently purchased $$5$ million worth of Zest shares. When details of an offer by Energy to acquire Zest Energy were made public, Zest Energy shares rose by $30\%.$ However, talks between the two companies broke down just a few days

later, when it was revealed that Zest had misstated its customer numbers. The takeover offer was withdrawn and Zest shares collapsed before Galaxy Capital had a chance to sell. The Financial Markets Authority $($FMA$)$ subsequently launched an investigation into unusual trading activities in Zest shares surrounding the takeover discussions.

QUESTION:

Briefly explain why you chose this response. As part of your explanation, you should refer to relevant aspects of the CFA Standards of Professional Conduct and, where appropriate, the CFA Ethical Decision$-$Making Framework that you followed to derive your conclusion. Also include briefly explain two reasons why it might be beneficial for Energy to adopt a code of ethics for its employees, even if there is an initial cost involved $($eg training etc$)$