smuggycfa

I’m sorry - last one from the same set. Question 18,
Chris Rodriguez, CFA, is a portfolio manager at Nisqually Asset Management, which specializes in trading highly illiquid shares. Rodriguez has been using Hon Securities Brokers almost exclusively when making transactions for Nisqually clients, as well as for his own relatively small account. Hon always executes Rodriguez’s personal trades at a more preferential price than for Rodriguez’s clients’ accounts. This occurs regardless of whether or not Rodriguez personally trades before or after clients. Rodriguez should least likely do which of the following in order to comply with the CFA Institute Code of Ethics and Standards of Professional Conduct?
A. Eliminate the exclusive trading arrangement.
B. Trade client accounts before his own account.
C. Average trade prices across all trading accounts.
Answer = C
C is correct because Rodriguez is in violation of Standard IV (A) Loyalty, which requires that, in matters related to their employment, members and candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information, or otherwise cause harm to their employer. Rodriguez should not accept the special treatment from Hon, and he should seek such favors for the clients of Nisqually, specifically the lower costs Rodriguez has been getting for his transactions. Rodriguez should not average transaction costs because his clients should be given the lower preferential prices according to Standard III (A) Loyalty, Prudence, and Care.
This one may not be AS BAD as the previous two but… the question clearly states that Rodriguez gets preferential treatment regardless of whether he trades his account before or after his clients. How is answer B incorrect? This would be the LEAST effective way to resolve the bias. I concur that eliminating the arrangement would be one solution but averaging trade prices (his own lower prices as well as his clients prices) would ensure that there is no biased. His account is admittedly a small account so his trade volume would not be expected to effect the price.