Well, refraining from action is not an action, and, hence, in the context of the Standard, by not taking action (purchasing or selling shares or issuing buy, sell or hold recommendations), you won’t be acting on material non-public information. My opinion; maybe other opinions?
This seems preety obscured… According to the code of ethics, you’re expected to carry out the trade as if you have no knowledge of possible drop in earning of the firm. So you will still buy the same number of stocks and incure the accompanying loss if truly the earning do drop.
However, in reality, i doubt traders will adhere to this norms, knowing before hand that they will be making losses on the trade. Human is selfish by nature… just saying…
What’s your view
I don’t think it’s obscure… if you change your purchase or sale amount based on the insider information, then you’re violating the standards and probably the law. The standard is the standard. Whether people follow it or not is a different issue, but they’re supposed to follow the standard. It’s not about avoidng a loss or achieving a gain at any cost- it’s about doing what’s best for a client, while remaining within the standards and laws.
If the investment company has an approved list of stocks to buy which results from an adequate research with enough back up and fundamented papers, any move of last moment could not be adequately fundamented. So any unexpected change in the strategy caused from the use of material non-public information would be a violation of the code and surely the local laws.
Standard II-A: Material Nonpublic Information Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.