You are an investment adviser representative. Your client, Mr. I. M. Pulse, calls you with what he thinks is exciting news. He just passed a restaurant and saw Microsoft’s Bill Gates having lunch with a local entrepreneur who owns a small firm in the computer software industry that trades on the OTC pink sheets. He is sure that this means Microsoft is negotiating a purchase of the smaller company and instructs you to take the cash balance in his account and buy shares of the local company. You should
Explanation
Answer: C - If Mr. Pulse wants you to place an order to buy a firm that he thinks will become a target of Microsoft based on seeing Bill Gates and the owner of the firm dining together, you should, as his adviser, inform him that he may be jumping the gun and drawing a false conclusion, but you should place the order if he continues to insist. It is a legitimate order, and you are obligated to follow his instructions. It does not constitute illegal insider trading because Mr. Pulse has no way of knowing what the two men were talking about. They may just be old high school buddies catching up on the news.
