Ethics and ROS something, research, standards

parott

Hi Guys,

Just wondering if I am missing something or if there is a bit of a clash here....

Under the guidance for Standard 6B (Conflicts of Interest - Priority of Transactions) it says that an adviser can trade against a recommendation (for example, to pay for a child's tuition) as long as you do not disadvantage a client etc.

However, under the research objectivity standards, in Standard 7 (Personal Investments and trading) It says that you can't trade against a recommendation unless it's to relieve extreme financial hardship. There is an EOC question that supports this interpretation. Even though the question states that the adviser is selling the stock to buy an anniversary present for his wife, (he currently has a buy recommendation out on the stock) it is judged to be in breach of the ROS.

So it seems that the same action would be allowable under the CFAI Standards of Professional Conduct, but not under the Research Objectivity Standards...

Can anyone clarify this please?

jarobi04

Thanks me.tega,

I guess I just thought it was strange that in the Conflicts section there just wasn't much made of trading against your position, you just had to ensure that you weren't profiting at your clients' expense.

On another note, believe me, there are some women I know who would consider an anniversary gift far more important than tuition!! Lol...

Anyways, thanks for the quick answer!