Question

The CEO further asked you keep the information private and to give positive commentary on the company in your next report Which ethical principle is most applicable in this situation? and What is your most appropriate next step? Select one:

a. Diligence and reasonable basis; Share the information and your "sell" recommendation with the portfolio managers at EIF only after you conduct more research
b. Material non-public information; Share the information and your "sell" recommendation with the portfolio managers at EIF to protect clients' interests
c. Fair dealing: Share the information and your "sell" recommendation with the portfolio managers at EIF to protect clients' interests and the integrity of the capital market
d. Material non-public information; Not share the information disclosed by the CEO or your "sell" recommendation with the portfolio managers at EIF
e. Fair dealing; Share the information and your "sell" recommendation with the portfolio managers at EIF only after you conduct more research

Answer 1

The ethical principle relevant to a CEO requesting confidentiality and positive commentary is 'Material non-public information.' The correct option to choose is d.

Step-by-step explanation:

In the scenario described, where a CEO asks for confidentiality and positive commentary, the ethical principle most applicable is Material non-public information. This principle refers to information that has not been made public and that can have a significant impact on the price of a company's securities. In ethical terms, using such information for personal gain or sharing it selectively can be considered insider trading, which is illegal and unethical.

The most appropriate next step is to not share the information disclosed by the CEO or your "sell" recommendation with the portfolio managers at EIF. By keeping the information private, you comply with the legal and ethical standards regarding non-public information.

It is important to maintain the integrity of the capital markets by not acting on or spreading material non-public information. Therefore, the correct option to choose is d. Material non-public information; Not share the information disclosed by the CEO or your "sell" recommendation with the portfolio managers at EIF.