The chief commodity trader for a large energy company learns from a friend that a competitor will likely fail its upcoming regulatory audit and will be forced to temporarily decrease production. If the information is true, the trader has short-term opportunities to make trades that will financially benefit the trader's company and will lead to a substantial increase in the trader's performance bonus. However, if the information is not true, making the trades will significantly increase the company's risk of being caught in a long position. From an ethical perspective, which of the following would be the most appropriate course of action for the trader to take?
A) Make the trade because the company and the trader will both benefit.
B) Have another trader on staff make the trade in order to avoid a conflict of interest.
C) Disclose the information to the risk oversight committee but proceed with the trade to capitalize on the opportunity.
D) Defer the decision to management and risk the loss of the trading opportunity.

Question

Quizplus · Accepted Answer

The most ethical course of action is to defer the decision to management. This ensures that the decision is made with full awareness of the potential risks and benefits, and it avoids acting on potentially unreliable information that could harm the company.

The Chief Commodity Trader for a Large Energy Company Learns