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That same day, Colleen Collins, a research analyst, approaches McGuinn, con- cerned that she may be in possession of insider information. Collins relates that she

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That same day, Colleen Collins, a research analyst, approaches McGuinn, con- cerned that she may be in possession of insider information. Collins relates that she was at a party the night before and overheard a conversation between two CEOs of competing, publicly listed manufacturing companies. The CEOs discussed, but did not express their opinions on, the validity of a recent article published in an online industry newsletter, which was speculating on the benefits of a merger between their two companies. The newsletter is available by subscription only. One of these com- panies is on Forster's recommended buy list. Following this conversation, McGuinn feels it is necessary to enhance Forster's rules and procedures when dealing with possible insider information. He recommends the following changes to the company's policies and procedures: Recommendation 1: Stop market-making activities when in possession of mate- rial nonpublic information. Recommendation 2: Regularly review employee and proprietary trading. Recommendation 3: Require all employees to attend an annual refresher course on how to identify and handle material nonpublic information. After reviewing how Forster chooses and retains its stockbrokers every year, McGuinn makes several changes in the policy. The following guidelines are imple- mented and communicated to clients. Stockbroker selection must be based on the brokers' ability to: Guideline 1: provide accounting software. Guideline 2: execute client transactions efficiently. Guideline 3: obtain invitations to investment conferences for loyal clients. After undertaking investigations based on an anonymous report, McGuinn con- firms that several Forster fund managers were witnessed being wined and dined over the past few weeks by large brokerage firms trying to get Forster's business. The same employees have not notified him about these dinners, a violation of Forster's internal policies. McGuinn notifies the employees in writing that they have been violating the company policy. In the letter of notification, he requires the employees to abide by the policy in the future. 1 Is McGuinn's proposed compliance officer structure most likely consistent with the CFA Institute Code and Standards? A No, with regard to authority and responsibility. B Yes ( No, with regard to policies and procedures

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