Tonya Tucker, CFA, is a financial analyst at Bowron Consolidated. Bowron has numerous subsidiaries and is actively involved in mergers and acquisitions to expand its businesses. Tucker analyzes a number of companies, including Hanchin Corporation. When Tucker speaks with the CEO of Bowron, she indicates that many of the companies she has looked at would be attractive acquisition targets for Bowron. After her discussion with the CEO, Tucker purchases 100,000 shares of Hanchin Corporation at $200 per share. Bowron does not have any pre-clearance procedures, so the next time she meets with the CEO, Tucker mentions she owns shares of Hanchin. The CEO thanks her for this information but does not ask for any details. Two weeks later, Tucker sees a company-wide email from the CEO announcing Bowron's acquisition of Hanchin for $250 a share. With regards to her purchase of Hanchin stock, Tucker least likely violated the CF

• A. Standard II(A) Material Nonpublic Information.
• B. Standard VI(B) Priority of Transactions.
• C. There is no violation of Standard II(A) Material Nonpublic Information.
• D. Loyalty, Prudence and Care.

Answer: (C)

The key idea here is whether Tucker traded on material nonpublic information. She discussed with Bowron’s CEO that many targets would be attractive, which is a general M&A discussion and does not reveal a specific, nonpublic plan to acquire Hanchin. She then bought Hanchin shares before any public announcement. Since there’s no evidence she had specific, actionable information about Bowron’s plans to acquire Hanchin at the time of her purchase, her trade isn’t based on material nonpublic information. The later public announcement by Bowron doesn’t retroactively make her prior trade a violation.

So there’s no violation of Standard II(A) MNPI in this scenario. The other standards cited aren’t clearly implicated by the facts given (the situation isn’t about prioritizing a personal trade over client orders, nor about disloyalty or failure to exercise prudence in a way that would plainly apply here).