Reading 2-III: Standards of Professional Conduct & Guid

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Q1. Which of the following would be a violation of Standard III(B), Fair Dealing?

A) Having well defined guidelines for pre-dissemination.

B) Limiting the number of employees privy to recommendations and changes.

C) Trading for regular accounts before discretionary accounts.

Q2. An analyst meets with a new client. During the meeting, the analyst sees that the new client’s portfolio is heavily invested in one over-the-counter stock. The analyst has been following the stock and thinks it will perform well in the long run. The analyst arranges through a brokerage firm to simultaneously sell a large number of shares of the stock via a series of cross trades from the new client’s portfolio to various existing clients. He arranges the trades to be executed at a price that approximates the current market price. This action is:

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

B) a violation of Standard III(B), Fair Dealing.

C) not in violation of the Standards.

Q3. Which of the following statements is least accurate regarding being a part of Standard III(B), Fair Dealing?

A) Shorten the time between decision and dissemination.

B) At the same time notify clients for whom an investment is suitable of a new investment recommendation.

C) Maintain a list of clients and their holdings.

Q4. An analyst goes straight from a research seminar to a meeting with a prospective new client with whom she has never been in contact. The analyst is very excited about the information she just received in the seminar and begins showing the prospect the new ideas her firm is coming up with. This is most likely a violation of:

A) both of these.

B) Standard III(B), Fair Dealing.

C) Standard III(C), Suitability.

Q5. A money management firm has the following policy concerning new recommendations: When a new recommendation is made, each portfolio manager estimates the likely transaction size for each of their clients. Clients are notified of the new recommendation in the order of their estimated transaction size—largest first. All clients have signed a form where they acknowledge and consent to this allocation procedure. With respect to Standard III(B), Fair Dealing, this is:

A) not a violation because the clients have signed the consent form.

B) not a violation because the clients are aware of the policy.

C) a violation of the standard.