A researcher or analyst uses nonpublic information obtained from a colleague to trade. Which Standard is violated?

• A. Standard II.A Material Nonpublic Information
• B. Standard I.B Independence and Objectivity
• C. Standard V.C Record Retention
• D. Standard IV.D (GIPS)

Answer: (A)

The key idea is that trading on material nonpublic information is prohibited. Material information is any info that a reasonable investor would consider important in making an investment decision, and nonpublic means it hasn’t been widely disseminated. If a researcher or analyst uses such information obtained from a colleague to trade, they’re leveraging inside information to gain an advantage, which undermines market fairness and breaches the CFA Institute’s expectations for ethical conduct. This exactly falls under Standard II.A, which forbids trading on material nonpublic information and also prohibits sharing it or tipping others. The other standards mentioned relate to independence and objectivity, record retention, or GIPS, which do not address insider trading, so they don’t fit this scenario.