📖 Standard III(B) — 公平对待（Fair Dealing）

Module: 1 — Ethics & Professional Standards
Section: 1.3 — Standard II: Integrity of Capital Markets
Progress: 19/560 lessons
Date: May 28, 2026

📖 Review: What We Learned in L018

In L018 we covered two critical applications of Standard II(A) — Material Nonpublic Information:

1. Insider Information — trading or causing others to trade based on MNPI violates II(A). Information is "material" if a reasonable investor would consider it important in making an investment decision, and "nonpublic" if it has not been disseminated to the marketplace.

2. Mosaic Theory — analysts may combine public information with nonmaterial, nonpublic information to form investment conclusions that are not violations of II(A). The key distinction: the conclusion must be derived from piecing together publicly available or immaterial facts, not from a single material nonpublic tip.

3. The Firewall / Information Barrier — firms use physical and electronic separation between departments (e.g., investment banking vs. research) to prevent MNPI from crossing. Chinese walls are a compliance mechanism, not a defense — if they fail, the violation still occurs.

Memory aid: Mosaic = connecting public dots; Insider trading = getting the answer key.

🆕 New Concepts

2.1 Selective Disclosure — The "Whisper" Problem

Definition: Selective disclosure occurs when an issuer provides material nonpublic information to a select group of analysts, institutional investors, or other market participants before disclosing it to the general public.

Regulatory Context:

Why Selective Disclosure Violates II(A): Even though you are on the receiving end of the issuer's disclosure, you possess MNPI that others in the market do not. Trading on it — or recommending trades based on it — is a violation.

Example 1 — Earnings Preview Call

A company CFO calls three favored analysts the night before the official earnings release and says, "We're going to miss estimates by 15%." The analysts who act on this information by downgrading the stock after-hours violate II(A) because the information is both material and nonpublic, regardless of where it came from.

Example 2 — Unintentional Slip-Up

During a factory tour, a company manager casually mentions to an analyst that a major new contract has been signed but won't be announced for two weeks. The analyst must: 1. Not trade on the information 2. Make a reasonable effort to achieve public dissemination of the information (e.g., urge the company to issue a press release)

2.2 Expert Networks — The "Consultation" Trap

Definition: Expert networks are firms that connect investors with industry experts (doctors, engineers, former executives) for paid consultations. These consultations are legal in principle but carry significant MNPI risk.

The Core Problem: Experts often possess material nonpublic information from their current or former employers. If they disclose this during a consultation, the analyst receiving it is in possession of MNPI.

CFA Institute Guidance:

Due Diligence Requirements when Using Expert Networks:

1. Written policies and procedures — the firm must establish guidelines for expert network consultations
2. Pre-call vetting — identify the expert's employer, role, and potential access to MNPI
3. Restricted topics — prohibit questions about current employer's nonpublic information
4. Record-keeping — document all calls, including topics discussed and warnings given
5. Confidentiality agreements — ensure experts sign agreements not to disclose MNPI
6. Post-call review — compliance review of call notes

Example 3 — The Expert Network Trap

A hedge fund analyst hires an expert who works as a R&D director at a pharmaceutical company. The expert reveals that the company's new drug just failed its Phase 3 trial — a fact not yet made public. The analyst writes a short recommendation. This is a clear violation of II(A): the information is material and nonpublic. The fact that the analyst paid an expert network for the "consultation" does not make it legitimate.

Example 4 — Proper Use of Expert Network

An analyst speaks to a retired industry veteran who left her company 3 years ago. The expert discusses general competitive dynamics in the semiconductor industry and provides her personal opinion on technology trends, without disclosing any specific nonpublic information about any company. The analyst uses this as one input into a mosaic of public information. This is permissible under II(A).

Example 5 — "They Said They'd Get Clearance"

Before a call, an expert network assures the analyst that the expert has received clearance from their employer to speak. During the call, the expert reveals that their employer's quarterly revenue is running 30% ahead of consensus. The analyst cannot rely on the network's clearance — the obligation to avoid MNPI rests with the member/candidate. Trading or recommending on this information violates II(A).

2.3 Selective Disclosure vs. Expert Networks: Key Distinction

📝 Worked Examples

Example A: The Roadshow Slip

During a roadshow for a potential IPO, the CEO of a fintech startup tells a group of institutional investors that "our user growth rate last quarter was 3x what our competitor reported." This information is not in the S-1 filing and hasn't been made public.

Analysis: The information is material (user growth is a key valuation metric for a fintech startup) and nonpublic. Investors in the room now possess MNPI. They must: - Not trade in the anticipated IPO or the competitor's stock - Urge the CEO to publicly disclose the information - If the CEO refuses, consult legal/compliance about next steps (which may include avoiding the investment entirely)

Example B: The Mosaic + Expert Network Combination

An analyst reads 15 public earnings reports, studies industry association data, attends a trade show (where public presentations are given), and separately speaks with an expert network consultant who discusses only how pricing power in the industry has shifted. The analyst forms a conclusion about a specific company's future revenue.

Analysis: If the expert network consultant ONLY discussed public/general information (industry pricing trends observable by anyone), this is a textbook mosaic theory application and does NOT violate II(A). The key test: could another analyst, with access to the same public information, theoretically reach the same conclusion?

Example C: The "Can I Un-hear This?" Problem

An analyst is on a conference call when a company executive accidentally mentions a number that hasn't been publicly released. The executive immediately says, "Sorry, that wasn't supposed to be disclosed yet."

Analysis: The analyst now possesses MNPI through no fault of their own. However, the obligation under II(A) attaches immediately: 1. Do not trade or recommend 2. Inform compliance 3. The firm should determine whether to disseminate the information or restrict trading 4. The analyst should document what happened

✏️ Practice Quiz (5 Questions)

Q1. A pharmaceutical analyst subscribes to an expert network and schedules a call with a clinical researcher at a drug company. Before the call, the analyst ensures the expert signs a confidentiality agreement stating she will not discuss nonpublic information. During the call, the expert says: "I can't give you numbers, but let's just say our new drug results are going to shock the market — in a good way." Under Standard II(A), what should the analyst do?

A) Use the information to form a buy recommendation — the expert didn't disclose specific numbers, so this is not MNPI
B) Immediately inform compliance, refrain from trading or recommending, and document the call
C) Trade on the information — the analyst took reasonable steps by having the expert sign an agreement
D) Wait 24 hours and then act — that allows the market to absorb the information

Q2. Which of the following is LEAST likely to constitute a violation of Standard II(A) regarding selective disclosure?

A) A company CFO providing next quarter's revenue guidance to three analysts on a private call before the public earnings release
B) An analyst overhearing two company executives discussing the upcoming acquisition of a competitor on a crowded train
C) A company holding a town-hall style investor day where all investors present simultaneously receive new product launch details
D) A company sharing preliminary financial results with its lending bank syndicate under a confidentiality agreement

Q3. When using an expert network, which compliance practice provides the STRONGEST protection against II(A) violations?

A) Relying on the expert network platform's own vetting and disclaimer system
B) Recording all calls and having compliance review them after trades are executed
C) Pre-approving discussion topics, prohibiting questions about current employers, and conducting compliance review of notes before any trading
D) Only speaking to experts who are retired from the industry

Q4. An investment advisor receives an email from a company's investor relations department titled "Q3 Preliminary Results — EMBARGOED." The email contains revenue and EPS figures that are significantly above consensus estimates. The IR contact says: "This goes public tomorrow at 8 AM." The advisor immediately places buy orders for the stock. Has the advisor violated Standard II(A)?

A) No — the information came directly from the company's IR department, which is an authorized source
B) No — the information will be public within 24 hours, so "prompt" disclosure is satisfied
C) Yes — the information is material and nonpublic, and trading on it violates II(A) regardless of the source
D) No — the advisor has a fiduciary duty to clients, and getting in before the public release benefits them

Q5. Which of the following statements about the "mosaic theory" and expert networks is most accurate?

A) Expert network consultations are always violations of II(A) because experts always possess MNPI
B) An analyst may combine insights from expert network consultations with public information to form a mosaic, provided the expert does not disclose specific material nonpublic information
C) The mosaic theory defense is strengthened when the analyst relies exclusively on a single expert network source rather than multiple public sources
D) Expert network consultations are exempt from II(A) if the expert has left their employer less than 6 months ago

📌 Summary

Next Lesson (L020): Standard II(A) — Comprehensive Cases & Practice
Answer Key: Will be provided with tomorrow's review.