Q:
Rennie Asada, CFA, is a portfolio manager with Martek Securities. Rennie just learned that a very influential analyst within his firm is about to issue a sell rating on one of the stocks he owns both for his clients and for his personal accounts. In order to comply with Standard VI-B, Priority of Transactions, which of the following courses of action must Rennie take?
I. Allow Martek Securities to carry out its own trades before Rennie executes the trades for his personal accounts.
II. Ensure that before the clients' accounts are adjusted, Martek Securities has an opportunity to carry out its own trades.
III. Execute the trades for the clients first before Rennie executes any trades for his own personal accounts.
IV. Execute a block trade and then determine on a pro-rata basis, how many shares will be affected from the accounts of the clients, the firm and members' personal accounts.
a) I and III only
b) I, III and IV only
c) II and IV only
d) II and III only
A:

The correct answer is: a)
The guiding principle behind Standard VI-B is to take care of clients first, and only after the clients trades have been executed would it be appropriate to take care of personal interests. Both I and III indicate the appropriate priority. A pro-rata distribution of a block order (Choice IV) gives equal priority, while choice II places personal interests first. Both violate the Standard.


MORE FAQS

  1. Which of the following signatures are required on a client’s new account form ...

  2. An advisor has all client advisory fees automatically deducted from their accounts by the custodian. 

  3. Which of the following statements is (are) true with respect to setting the proper constraints in managing ...

  4. Which of the following are tools that are employed by the Federal Reserve in its efforts to control the money supply?

  5. Which of the following statements is (are) true with respect to the factors that a manager must take ...

  6. If a person's account is frozen, which of the following activities is allowed ...

  7. Federal covered securities are subject to which of the following requirements ...

  8. Which of the following, under the NASD Conduct Rules, would constitute a complaint ...

  9. What two components are used to calculate risk-adjusted return? I ...

  10. Under the Uniform Securities Act, registration with the Administrator as an investment adviser is required ...

  11. Which of the following statements is (are) true with respect to the key characteristics of the Global ...

  12. Which statement(s) is/are FALSE about market risk?

  13. In the separate account of a variable annuity, which of the following characteristics apply to annuity ...

  14. When a corporation wishes to open a margin account with a broker-dealer ...

  15. Under a pegged exchange rate system which of the following measures can be undertaken by a home country ...

  16. What is the best measure of a given stock's volatility?

  17. Are dividends the best way to make money for retirement?

  18. How did George Soros "break the Bank of England"?

  19. What is the best way to diversify an investment portfolio?

  20. What's the average salary of a financial advisor?

RELATED FAQS

  1. Which of the following signatures are required on a client’s new account form ... ...

    The correct answer is B. While local practices of a broker-dealer might require the client to sign the form, even when opening ...
  2. An advisor has all client advisory fees automatically deducted from their accounts ...

    The correct answer is c) An advisor is not deemed to have custody of client funds when debiting management fees from the ...
  3. Which of the following statements is (are) true with respect to setting the proper ...

    The correct answer is: d) Choice II is incorrect because the longer the investment horizon, the less emphasis must be placed ...
  4. Which of the following are tools that are employed by the Federal Reserve in its ...

    I. Moral suasionII. Changing the discount rateIII. Changing the reserve requirementIV. Changing the prime interest rate A. ...
  5. Which of the following statements is (are) true with respect to the factors that ...

    The correct answer is: d) (I) is incorrect because if interest rates are expected to rise, banks will generally "increase" ...
  6. If a person's account is frozen, which of the following activities is allowed ... ...

    The correct answer is a A frozen account does not mean that the person can not trade, it means that transactions must be ...
RELATED TERMS
  1. Execution Only

    A trading service that is restricted to execution of trades only, ...
  2. Account Executive

    This term refers a person who has primary responsibility for ...
  3. Firm Order

    1. A market order to buy or sell a security for a brokerage's ...
  4. Discretionary Account

    An account that allows a broker to buy and sell securities without ...
  5. Agency Broker

    A broker that acts as an agent to its clients. When acting as ...
  6. Discretionary Investment Management

    A form of investment management in which buy and sell decisions ...
Hot Definitions
  1. Applicable Federal Rate - AFR

    Rates published monthly by the IRS for federal income tax purposes. These rates are used to calculate assigned interest charges. ...
  2. Foreign Exchange Reserves

    Foreign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities on their ...
  3. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity ...
  4. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  5. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  6. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
Trading Center