Jung violated the investment-process rules when she recommended Blanton stock for purchase based on nothing more than a recommendation from a client and a few minutes of analysis. She received a phone call an hour before the market opened, yet managed to talk to her client and research two stocks before the hour was up. She did not meet the standard, “Thoroughly investigate and research different investment options to have a reasonable basis for a recommendation.” As for Yeats’ shares, while she did not have enough information to recommend Blanton, she did have Yeats’ instructions to purchase the stock for himself. There appear to be no insider-trading issues, as the only nonpublic information he cited was an informal conversation with the manager, which is not likely to be material. So Jung should have purchased the shares for Yeats immediately, but not recommended them for anyone else until she had researched the company thoroughly. Based on her reasoning for not buying Flimflam, Jung was apparently allowed to purchase specific stocks at the request of investors without submitting them for approval by the investment director, so no matter what she thought about Blanton, there was no reason to wait on buying shares for Yeats. Regarding the IRS, confidentiality rules do not necessarily apply to official legal investigations |
