Reading 2-III: Standards of Professional Conduct & Guidance: Duties to Clients and Prospective Clients

LOS A.: Loyalty, Prudence, and Care

1、While trading on behalf of a pension account, an analyst receives special research reports from the brokerage firm with whom she is doing the trades. Such an activity is:

A)   a violation of both Standard III(A), Loyalty, Prudence, and Care, and the Code of Ethics.

B)   a violation of only The Code of Ethics.

C)   a violation of only Standard III(A), Loyalty, Prudence, and Care.

D)   not in itself a violation of Standard III(A), Loyalty, Prudence, and Care, nor the Code of Ethics.

The correct answer was D)

An analyst can receive research from a brokerage firm with whom she is trading on behalf of a client. The analyst should inform the client of the arrangement. The client is more likely to violate Standard III(A) by obtaining non-research services or, worse yet, personal benefits from the brokerage firm.