CFA Level 1: Neeson Pacino and the IPO Process

The Impact of Neeson Pacino's Decision on Curare Creators' IPO

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Question

Neeson Pacino is the senior vice president in the corporate finance arm of Hindenberry Brokerage. Neeson was recently approached by Curare Creators, a pesticide manufacturer. Curare would like to offer new equity to raise capital and has provided Neeson with its current balance sheet and details about the pending projects. Neeson carefully goes over the numbers with a couple of project managersat Curare and also two of his analysts at Hindenberry. He concludes from these discussions that the numbers presented by Curare are overly optimistic. The revised numbers would seriously lower the offering price. Not relishing this prospect, Neeson decides to go ahead with the numbers as drawn up by Curare and directs the department to prepare the IPO with the offering price. Neeson has

Answers

A. violated Standard IV (A.1) - Reasonable Basis & Representations.

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

C. violated Standard IV (B.1) - Fiduciary Duties.

D. violated Standard II (B) - Duty to the Employer.

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Explanations

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A. B. C. D.

By knowingly misrepresenting the situation, Neeson has allowed the possibility that investors would end up paying more than the fair price in the seasoned equity offering. He has thus violated Standard IV (A.1) - Reasonable Basis & Representations.

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