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← Series 79: Section 4
Series 79 practice questionmediumChinese Walls / Information Barriers

An investment banking analyst working on a confidential M&A transaction overhears a colleague from the equity trading desk discussing a potential trade in the target company's stock. What is the analyst's most appropriate course of action?

  1. AImmediately report the potential information barrier breach to the firm's compliance department✓ Correct answer
  2. BIgnore the conversation since the analyst did not initiate it
  3. CInform the trading desk colleague about the pending transaction so the colleague can avoid regulatory problems
  4. DPlace a personal trade in the target company's stock before the information becomes public
Explanation

Why A — Immediately report the potential information barrier breach to the firm's compliance department

When an employee becomes aware of a potential breach in the firm's information barriers, the appropriate action is to immediately notify the compliance department. Compliance personnel can then investigate whether MNPI has crossed the wall and take corrective action, which may include placing the security on a restricted or watch list. Sharing the confidential information, ignoring the situation, or trading on the information would all constitute serious violations of securities law and firm policy.

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