Views on improving the integrity of global capital markets
11 October 2018

Ethics in Practice: Disclosures on Twitter. Case and Analysis–Week of 8 October

CFA Institute Ethical Decision-Making Framework

Check the analysis of this week’s case (8 October) to see if you made the right choice.


Allen Brodeur is CEO and Chairman of the board of Questla, a multibillion dollar company that makes electric cars. Brodeur and Questla disclose to the public and regulators that the company will use Brodeur’s personal Twitter account to disseminate information to Questla investors and the investing public. In the midst of media reports that the company was having difficulty producing and delivering its cars to buyers, Brodeur posts a tweet stating that the company is “considering taking Questla private at $420 a share. Funding is secure.”

Some time prior to this tweet, Brodeur had met with a large sovereign wealth fund that expressed general interest in investing in the company and taking the company private. Brodeur and the sovereign wealth fund had not come to any specific agreement or determined a share purchase price. Brodeur was also in discussions with investment banks, but had not yet retained any advisers to assist with going-private transaction. After the tweet, Questla’s stock price increased more than 6% on significantly increased volume and closed at $380 per share, 10% higher than the previous day. When asked about the specific stock price in the tweet, Brodeur admitted that it was not discussed with the sovereign wealth fund but that he chose the price of $420 because of the number’s significance in the marijuana culture and thought his girlfriend “would find it funny.” Brodeur’s actions are

  1. appropriate because disseminating material information to investors through social media is a valid method for publicizing information.
  2. inappropriate because not all investors use social media, and thus, Brodeur is putting certain investors at a disadvantage and selectively disclosing the information.
  3. inappropriate because the tweet was a misrepresentation of the facts.
  4. appropriate because his tweet only said that he was “considering” taking the company private and thus the tweet contained only speculative, nonmaterial information.


This case relates to CFA Institute Standard I(C): Misrepresentation, which states that CFA Institute members must not knowingly make any misrepresentation relating to professional or investment activities. Brodeur’s tweet was premised on a series of baseless assumptions and was contrary to facts that he knew. Among other things, he (1) had not agreed on any terms for a going-private transaction with the sovereign wealth fund, (2) had never discussed a going-private transaction at a share price of $420, (3) set the price as an inside joke with his girlfriend, and (4) had not formally retained any legal or financial advisers to assist with a going-private transaction. Unlike market participants reading his tweet, Brodeur knew that his ostensibly “secured” funding was based on a general conversation regarding a potential investment of an unspecified amount in the context of an undefined transaction structure. Because there were many uncertainties that would have needed to be resolved before any going-private transaction could be possible, Brodeur knew or should have known that his statements were false and misleading.

But the tweet can be considered “material” information and not speculative given that the source of the tweet was the company’s CEO and Chairman of the board, the subject matter of the tweet was dramatic and elemental, and investors would want to know the information prior to making an investment decision. Disseminating information to investors using social media may be appropriate and ethical under certain conditions. Distribution channels to make information public do not need to guarantee to reach all investors, but they must be designed to effectively make the information public. As long as information reaches all clients or is open to the investing public, the use of social media platforms would be comparable with other traditional forms of communication, such as press releases or email communication. Because the information in this case was misleading, Brodeur’s use of social medial was not appropriate. Choice C is the best answer

This case is based on a 29 September 2018 enforcement action by the US SEC.

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More About the Ethics in Practice Series

Just as you need to practice to become proficient at playing a musical instrument, public speaking, or playing a sport, practicing assessing and analyzing situations and making ethical decisions develops your ethical decision-making skills. The Ethics in Practice series gives you an opportunity to “exercise” your ethical decision-making skills. Each week, we post a short vignette, drawn from real-world circumstances, regulatory cases, and CFA Institute Professional Conduct investigations, along with possible responses/actions. We then encourage you to assess the case using the CFA Institute Ethical Decision-Making Framework and through the lens of the CFA Institute Code of Ethics and Standards of Professional Conduct. Then join the conversation and let us know which of the choices you believe is the right one and explain why. Later in the week, we will post an analysis of the case and you can see how your response compares.

Image Credit: ©CFA Institute

About the Author(s)
Jon Stokes

Jon Stokes is the Director of Ethics and Standards Education at CFA Institute. His responsibilities include design and creation of on-line ethics education, development and maintenance of the CFA Institute Code of Ethics and Standards of Professional Conduct, and the design and management of the CFA Institute Ethical Decision-Making and Giving Voice to Values education programs. Stokes holds a JD degree.

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