Priority of transactions

Something i came to mind when i read priority of transactions. An investment manager has a clear written mandate from his client to purchase Stock A @ $50 or better . he plans to purchase stock A for his client, then on behalf of his firm and finally for himself. The stock touches 49. he quickly purchases it for his client, then for his firm. in the mean time the price drops to 46, at which point he purchases for himself. there are no restricted/blackout periods against trading for self and / or firm. he exerts no influence on price movement of stock, has no material non public short he had no freakin clue that the price would touch 46. does this seem like a violation of any standard?should he have not purchased for self and waited till the price touched 49 or more to avoid the mere appearance of conflict of interest?

No, I believe this is fine since the purchases were fair and orderly.

No violation, best execution does not mean having a crystal ball and predicting the lowest drip in price, it means getting the best execution at a GIVEN time. Priority of transactions was fine…

First client , then the firma and then self…No violation

Violation! You need to size up the order and promise same execution price within the block. I am guessing…

Is it a violation he purchased at $49 where the client specifically said $50 or above?

Ummm normally people want to purchase lower rather than higher… he didn’t say above, he said better… When buying, better is lower :slight_smile: Just throwing this out there :slight_smile:

nvestn is right! :slight_smile:

No violation, the client trade was executed first and allocated to the account. The manager was correct to ticket their trade separately. Blocking is not appropriate in this case as “Pro” trades are executed separate from client trades. Also the manager would most likely be required to complete Pre-clearance and obtain approval from a supervisor. This alone forces separation of trades as the ticket should match the terms of the approval( buy/ sell, price, quantity etc)

Assuming he had proper clearance from his manager - no violation. he would have to disclose his personal purchases to his manager, as said above.

This is not a violation. Standards say, if you are allowed (per your company policy) to trade for your personal account, then you should make sure your personal trade does not front run your client’s trade in a way it benefits you. For example, you have to buy a big lot for your client and you know that buying such a big lot will jack up the price of that stock. So, your buying the stock before your client’s trade is front running and is a violation. Similarly, if you have to sell a big lot for your client which you think could lower market prices after execution; you cannot sell your personal stock first so as to take advantage of prevailing higher prices.

this is related to which part? equity investments?

It’s Ethics, actually. Standards of Professional Conduct VI. Conflicts of Interest A. Disclosure of Conflicts B. Priority of Transactions C. Referral Fees. VI.B -> Pages 94-99 in the CFAI book vol I.


oh ok! I finished equity and never found it got scared to find it here - makes sense now since I didn’t do ethics yet :slight_smile: