The example is: “W. sells 500 shares of T (comp has a buy recommendation) and W buys 200 shares of H and the following day issues a buy recommendation on H”.
According to the solution, only the latter part is a violation. However, for me its also the sale of the shares.
Ok, I thought that was a violation. I guess if there is no front running, you are basically free to trade since it’s your company’s recommendation and not yours. But these are the reasons, why I never score ethics with 100% in mocks, no matter how much I study for it.
I had the same issue with this question. Anyone have an answer? I thought the rule was you couldn’t trade against a recommendation unless you were in financial hardship. But the answer to this question (it’s CFAI not schweser) seems to contradict this.
You’re mistaken. This isn’t the case in CFA text, Schweser, or anywhere. You can trade your own account basically however you want, regardless of the firm’s view, as long as you do not violate the SOPC. Just because your firm’s analyst rates a stock a Buy does not mean that you could not A) need to trade to rebalance, B) disagree with the analyst, c) need cash, etc.
i think this has to do with the “firm” vs. say if you were the analyst putting out that rating. you work at a bank that covers a wide universe of equities, you can sell AAPL even if your firm technically rates it as a buy.
I believe that if you were the analyst that rated it a buy, then you couldn’t sell the stock outside of finanical hardship however.
Probably the conflict firm rating vs. (own) analyst rating is the solution to that matter. I.e. you cannot trade against your own recommendation with the exception of financial hardship but it is fine to trade against your firm’s rating.
However, it is odd I could not find anything in the CFAI text / Schweser on that matter… I am sure it was in the curriculum. Thanks for your views.