if somebody trade on his personal account to get some money for gift , vacation, etc, and if the trade is against company research report ( for example , buy recommendation), is it a violation of CFAI code? Thanks
For the reason you listed its a violation. You not really ever supposed to trade contrary, you can do it for SEVERE financial distress. Dont do it just to buy the next 4k apple product, its a violation.
but i believe you can sell client holdings despite a buy recommendation in order to take profit - assuming the position has been held from before the most recent recommendation, and you’re not manipulating the market by buying, giving a +ve rating, letting the market jump, anmd then selling.
lots of stuff looks wrong there. Your basically saying the stock is overvalued. You should change the recommendation then or sell it for every client account. Taking profit from one account would be treating other clients unfairly. However, a client can request to trade the stock. They just need to be reminded its against the recommendation.
well i meant for all client accounts obviously and you might not sell because you think the stock is overvalued, you may have reached a stop-profit, hit a risk tolerance limit, achieved an objective and are looking to safeguard for now because the markets quite volatile
If its all clients should be fine, Just meant in general.
kurupt1 Wrote: ------------------------------------------------------- > but i believe you can sell client holdings despite > a buy recommendation in order to take profit - > assuming the position has been held from before > the most recent recommendation, and you’re not > manipulating the market by buying, giving a +ve > rating, letting the market jump, anmd then > selling. I would be interested in finding out more definitively if an investment manager is allowed to excercise discretion in booking a gain on a position against a firmwide buy recommendation. I would think that the only “discretionary” way you could do it would be if your asset allocation requires you to rebalance and, even then, you’d have to not sell out of the position completely. Aside from that I’d think it would have to be client mandated…but this is me trying to apply “logic” to rules that often times have little…
i don’t think ive seen any questions like this. It more about trading personal accounts against the recommendation. I wouldn’t really worry about it.
justinkc Wrote: ------------------------------------------------------- > i don’t think ive seen any questions like this. > It more about trading personal accounts against > the recommendation. I wouldn’t really worry > about it. I completely disagree - last year’s ethics questions were just like that.
Ethics was extremely hard last year, took a guess on most of them, Don’t remember them though
I don’t see any problem with liquidating a stock position for personal liquidity needs. I think it comes down to intention. If you sell one stock to buy another it looks bad, but if you sell to spend that’s another thing, isn’t it? You wouldn’t actually be selling AGAINST a recommendation, you’d be tapping into funds for some discretionary spending. It’s an important distinction, I think. But what I think doesn’t matter - what’s the exam answer?!
if you trade to pay for cancer treatments for your uncle in law , its allowed.