Priority of Transactions and Fair Dealing

Williams and Fudd is a major London-based brokerage and investment banking firm. Heritage Group, a money management firm, is the first, second, or third largest holder of each of the securities listed on Williams & Fudd’s “PrimeShare #10” equity security list. On Tuesday morning, August 22, Williams & Fudd released a research report recommending the purchase of Skelmerdale Industries to the public and to its clients. On Wednesday afternoon, August 23, Heritage Group bought 1.5 million shares of Skelmerdale. This action is: A) in accordance with the CFA Institute Code and Standards. B) a violation of the Standard concerning fair dealing. C) a violation of the Standard concerning priority of transactions but would conform if Heritage had waited at least 48 hours after the report was issued. D) a violation of the Standard concerning disclosure of conflicts. ------------------------ This is not what the question is asking, but out of general interest: how long are firms required to wait after the release of material info before they can trade on their accounts? Is there a rule for this?

I don’t remember any specific timeframe. The idea is that clients should receive information and have time to react. In the above example they definitely had enough time to act on the information. The answer should be A.

I agree that the answer is A. I also don’t remember reading about a specific time frame, but thought I’d ask in case I’m missing something. Thanks, maratikus.

lola, as per maratikus, the Standards of Practice handbook doesn’t seem to get any more specific than these quotes from p. 121 and p. 122 “Conflicts between the client’s interest and an investment professional’s personal interest may occur. Although conflicts of interest exist, there is nothing inherently unethical about individual managers, advisors, or mutual fund employees making money from personal investments as long as (1) the client is not disadvantaged by the trade, (2) the investment professional does not benefit personally from trades undertaken for clients, and (3) the investment professional complies with applicable regulatory requirements.” “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.”

hiredguns1, do you have this handbook memorized front to back? or do you carry it with you 24/7?

liaaba, well, kinda. I have a PDF of it on my laptop which I carry around for what sometimes feels like 24/7. Thankfully it’s a sleek little Lenovo, the preferred brand of merc’s worldwide :slight_smile:

Very relevant and thorough, as always. Thanks, hiredguns1.