Reasonable and adequate basis vs material nonpublic info

CFA Level III Ethics
#1

One of Schmidt’s largest clients, Kiara Williams, holds a very large block of stock in Alpha Corporation. Alpha is a small niche firm in the biotech industry. She confides to Schmidt that she has asked her brother-in-law to help her sell her shares. She confides such a large sale is likely to significantly depress the Alpha stock price and is also likely to depress the stock prices of other companies in the industry. She apologizes to Schmidt that she cannot do the trade through him because that would anger her sister (the wife of the brother-in-law). Her brother-in law works for another investment management firm, unrelated to Schmidt’s firm. Schmidt refrains from initiating sales of Alpha for his other clients. However, he decides to sell some other clients’ holdings in Beta Company. Alpha Corporation and Beta Company are entirely unrelated, except for being in the same industry.

Are Schmidt’s actions related to selling Beta Company’s stock for his other clients in
compliance with the recommendations and requirements of the Asset Manager Code
of Professional Conduct?
A) Yes.
B) No, with respect to adequate basis.
C) No, with respect to material nonpublic information.

Correct answer: C.
I went for B. My reasoning: that information could as well just be a rumour. Don’t you need to make your OWN analysis before acting on such an info from a client? So, the manager probably did not have a reasonable and adequate info to begin with, and this is why B was my first choice (MOST likely violated). C would have been my second choice, as in, of course, it is also not permitted.
Could someone please explain why my reasoning was so wrong? :frowning:

#2

Willier is the research analyst responsible for following Company X. All the
information he has accumulated and documented suggests that the outlook for
the company’s new products is poor, so the stock should be rated a weak “hold.”
During lunch, however, Willier overhears a financial analyst from another
firm whom he respects offer opinions that conflict with Willier’s forecasts and
expectations. Upon returning to his office, Willier releases a strong “buy” recommendation to the public. Willier:
A Violated the Standards by failing to distinguish between facts and opinions
in his recommendation.
B Violated the Standards because he did not have a reasonable and adequate
basis for his recommendation.
C Was in full compliance with the Standards.

My point exactly, as in my initial post. The correct answer is B.

#3

Your reasoning is right. Your answer is wrong. Read the question carefully.