Andy Rock, CFA, is an analyst at Best Trade Co. The company is going to announce a sell recommendation on Biomed stock in one hour. Rock was a member of the team who reached the decision on Biomed. Rock’s wife has an account at Best Trade Co. that contains Biomed stock. According to the Code and Standards, trading on Rock’s wife’s account can begin: A) as soon as the information is disseminated to all clients. B) only after the recommendation is announced to the general public. C) only after Rock, as a beneficial owner, has given an appropriate amount of time for clients and his employer to act.
C
Your answer: C was incorrect. The correct answer was A) as soon as the information is disseminated to all clients. Family accounts that are client accounts should be treated like any other firm account and should neither be given special treatment nor be disadvantaged because of an existing family relationship with the member or candidate. Members or candidates may undertake transactions in accounts for which they are a beneficial owner only after their clients and employers have had adequate opportunity to act on the recommendation. Personal transactions include those made for the member or candidate’s own account, for family (including spouse, children, and other immediate family members) accounts, and for accounts in which the member or candidate has a direct or indirect pecuniary interest, such as a trust or retirement account. It could be argued that Rock is a beneficial owner of his wife’s account and the reason why his wife’s account should be treated like any other client account is because it does not state that Rock makes the trades in his wife’s account. From that we are to infer that another person other than Rock is managing his wife’s account thus she should be treated like any other client. Exactly what I thought, I just really don’t agree with question at all.
i thought that if you have a stake in the portfolio, you have to treat it differently. since in most countries a married couple shares assets, this answer doesn’t make sense!!!
Paraguay Wrote: ------------------------------------------------------- > Your answer: C was incorrect. The correct answer > was A) as soon as the information is disseminated > to all clients. > > Family accounts that are client accounts should be > treated like any other firm account and should > neither be given special treatment nor be > disadvantaged because of an existing family > relationship with the member or candidate. Members > or candidates may undertake transactions in > accounts for which they are a beneficial owner > only after their clients and employers have had > adequate opportunity to act on the recommendation. > Personal transactions include those made for the > member or candidate’s own account, for family > (including spouse, children, and other immediate > family members) accounts, and for accounts in > which the member or candidate has a direct or > indirect pecuniary interest, such as a trust or > retirement account. It could be argued that Rock > is a beneficial owner of his wife’s account and > the reason why his wife’s account should be > treated like any other client account is because > it does not state that Rock makes the trades in > his wife’s account. From that we are to infer that > another person other than Rock is managing his > wife’s account thus she should be treated like any > other client. > > Exactly what I thought, I just really don’t agree > with question at all. Holy crap!!! The explaination is dubious, it initially says that Rock has beneficial interest in the account, which we all know is true, but then it says that rock does not manage his wife’s account, is that reasonable enogh??? I mean in the exam with 120 questions to complete ,would we have enough time to lay out hypothesis for each ethics question, scenario A is right, but scenario A could be wrong if we assume ‘THIS, THAT’…
where did you get this from?
Comes from Schweser Book 2.
Another fantastically worded question from schweser…These types of questions are missing fundamental details, or assume we will deduct such details. Given A + B = C, C + A = B unless B is on vacation, then A takes over for B, but only if C is there, which we don’t really know, so you’ll just have to make that up…or something.
I think it all comes down to the use of the word on instead of in. On seems to imply that it is not the subject of this question trading. In would imply that it is.
I’m from the L2 forum and I will way in. Schweser is wrong. Is there on Errata?
WTF!
answer is A * always treat family clients as any other client * clients get information before general public because they paid for it this is a good question (and tricky) because it contains two tricky bits
But he does have beneficial interest in his wife’s account, so why it would be treated as a normal client account. by ‘family’ i think it means relatives, parents. But yes the trick is that it doesn’t mention anywhere that he is trading his wife’s account and we are not supposed to assume that he is. So eventually it will be treated as a normal account. Hope we don’t get such questions!
yeah, agree with herm18, always treat family clients as any other client it’s A
You are absolutely correct; a client is a client whether related to you or not and should be treated as other clients. Just read this in the CFAI text!! herm18 Wrote: ------------------------------------------------------- > answer is A > > * always treat family clients as any other client > * clients get information before general public > because they paid for it > > this is a good question (and tricky) because it > contains two tricky bits
Yep, pretty straightforward question from what I’ve seen. Treat it as all other accounts.
but since his wife’s assets are usually beneficial to him, this doesn’t make sense.
js1234 Wrote: ------------------------------------------------------- > but since his wife’s assets are usually beneficial > to him, this doesn’t make sense. or just to clear things out, the question should have said ex-wife… 
The question text does NOT say he is the beneficial owner. The answer © is testing whether you are aware that a wife’s assets are not necessarily beneficial to the husband. Given the lack of specificity about that in the question, you cannot assume he is the beneficial owner, and thus the answer is A. Dumb question though, I agree.