CMFAS RES5 Securities Dealing & Market Conduct question: firm rebuts an insider-dealing allegation by showing

CMFAS RES5Securities Dealing & Market Conduct

A firm rebuts an insider-dealing allegation by showing that the staff who made the trading decision were separated by internal information barriers from those holding the price-sensitive information. This defence is based on:

A The parity-of-information defence between the trading parties
B The broker-dealer exemption for unsolicited client orders
C Chinese-wall knowledge-attribution arrangements within the firm
D The underwriting exception for dealings in an underwriting role

Show the answer and explanation

Answer: C. Chinese-wall knowledge-attribution arrangements within the firm

Recognised exceptions and defences include Chinese-wall knowledge attribution, under which information held on one side of an internal barrier is not attributed to decision-makers on the other side. That is distinct from parity of information, the broker-dealer exemption and the underwriting exception.

Common mistake

Internal information barriers point to the Chinese-wall defence, not to parity of information or the broker-dealer exemption.

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