An investment dealer's internal policy restricts employees from trading in securities that are on the firm's 'restricted list'. A dealing representative, David, holds shares of Company X, which has just been added to the firm's restricted list due to impending private placement involvement. What is David ethically and legally required to do?

Question: An investment dealer's internal policy restricts employees from trading in securities that are on the firm's 'restricted list'. A dealing representative, David, holds shares of Company X, which has just been added to the firm's restricted list due to impending private placement involvement. What is David ethically and legally required to do?

Answer options: ✅ Immediately notify his compliance department of his holding and follow their instructions regarding the shares.

• Hold the shares until the restriction is lifted before selling them to avoid suspicion.
• Sell the shares quietly before the market opens the next day, as he acquired them before the restriction.
• Transfer the shares to a family member's account to avoid violating the policy.

Correct answer: Immediately notify his compliance department of his holding and follow their instructions regarding the shares.

Explanation: Dealing representatives must comply with their firm's internal policies designed to manage conflicts of interest and prevent misuse of material non-public information, which includes promptly reporting and acting on restricted list notifications.