Which of the following statements about the limitations that the Fair Dealing standard imposes is TRUE? A)Referral fees may be disclosed after proceeding with an agreement for service. B)The selection of a broker should be based solely on the principles of best price and results achieved. C)Clients should not be discriminated against when disseminating investment recommendations. D)Before trading on her own portfolio, a CFA charterholder must wait for employer and client deals to be executed. The answer is C. Does anyone know why D is incorrect?
maybe because as long as all clients the exact same information that the analyst has and will act on, the analyst shouldnt have to wait for them to move first.
frontrunning sounds about right. But as long as the info is disseminated to everyone, its fair game… why should she lose out on a good investment because she holds a charter? At the same time, if she was to wait for everyone to do something first, or her do something before everyone, then we have a case of frontrunning. fair dealing came up alot on my exam…
If they put their order in before client/employer, they are putting their own interests before the clients and employer. The Charterholder always has to trade last to maintain the integrity of capital markets. *This holds true in most cases if the security they wish to purchase is being traded by the firm. Due to preclearance of trades, a delay will be placed on their order until the clients and employer orders have been completed. If the security is not held by the firm, then the Charterholder should be able to trade immediately after approval from their supervisor/compliance.
Sorry, I don’t get it. Are you saying that answer D is frontrunning? It’s not… It’s frontrunning if the analyst trades before she puts in trades for her employer and clients, right?
A is completely wrong, and has nothing to do with Standard III, Duties to Clients (B) Fair Dealing, but with Standard VI Conflicts of Interest, © Referral Fees. B is correct, yet it has nothing to do with Standard III, Duties to Clients (B) Fair Dealing, but with Standard III, Duties to Clients, (A) Loyalty, prudence and care C is the right answer D is correct, yet it has nothing to do with Standard III, Duties to Clients (B) Fair Dealing, but with Standard VI Conflicts of Interest, (B) Priority of Transactions. Edit: pardon my English
Thank you map1. I got it now!