10 Days After Changing Recommendation on Zomega, Inc. Stock: Analyst Mark Blazewhich's Actions

Analyst Mark Blazewhich's Personal Holdings of Zomega Liquidated After Recommendation Change

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Question

Mark Blazewhich, an analyst with an investment advisory firm, changed the recommendation on Zomega, Inc.'s stock from hold to sell 10 days ago. This recommendation was published in the firm's newsletter that came out two days after this announcement. Blazewhich has just given his broker instructions to liquidate Blazewhich's personal holdings of Zomega. Blazewhich has:

Answers

A. violated Standard IV (B.3) - Fair Dealing.

B. violated Standard IV (B.7) - Disclosure of Conflicts to Clients and Prospects.

C. violated Standard IV (B.4) - Priority of Transactions.

D. not violated any standard of AIMR code.

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Explanations

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A. B. C. D.

Because Blazewhich has allowed sufficient time for dissemination of the change in recommendation, he is free to carry out personal transactions. Also, since the recommendation is to sell the stock, there is no personal conflict in the situation. Note that it would be a violation of Standard IV (B.7) - Disclosure of Conflicts to

Clients and Prospects - if the recommendation were to buy the stock and Crumpet had failed to reveal information about his personal holdings.

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