Reading 8: Trade Allocation: Fair Dealing and Disclosure习题

Reading 8: Trade Allocation: Fair Dealing and Disclosure

LOS a: Critique trade allocation practices and determine whether there is compliance with the CFA Institute Standards of Professional Conduct addressing fair dealing and client loyalty

1、Rey Sanchez, CFA, covers the specialty chemical industry for Rock Advisory Associates. Until today he has had a buy recommendation on ChemStar, and many of the firm’s customers have purchased shares based upon his recommendation. The firm’s client accounts are divided into two fundamental categories: trading and buy-and-hold accounts. The firm holds discretionary trading authority over the trading accounts, but not the buy-and-hold accounts. Sanchez has recently come to believe that the fundamentals are changing for the worse at ChemStar, and is preparing a sell recommendation. He calls a meeting of the firm’s portfolio managers with accounts holding ChemStar and tells them of the pending release of the sell recommendation. On this basis, the portfolio managers sell all positions in the discretionary accounts but not in the buy-and-hold accounts. Sanchez completes and mails the report to all clients two days later, and, shortly thereafter, many of the buy-and-hold accounts sell their ChemStar positions. With regard to these actions, Sanchez is:

A)   in violation of the Standard on Fair Dealing; the portfolio managers are in violation of the Standard on Fair Dealing.

B)   in violation of the Standard on Fair Dealing; the portfolio managers are not in violation of the Standard on Fair Dealing.

C)   not in violation of the Standard on Fair Dealing; the portfolio managers are in violation of the Standard on Fair Dealing.

D)   not in violation of the Standard on Fair Dealing; the portfolio managers are not in violation of the Standard on Fair Dealing.

The correct answer was A)

Sanchez is in violation of the Standard III(B), Fair Dealing, since he has disseminated his recommendation preferentially to the portfolio managers in advance of making the report available to all clients who hold shares of ChemStar. The portfolio managers are in violation of the Standard since they are effectively giving preferential treatment to the trading accounts over the buy-and-hold accounts in the placement of orders based upon the change in recommendation.

[此贴子已经被作者于2008-1-17 12:08:57编辑过]