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 calculation of returns of composites ...

  6. Which of the following are not types of open-end management investment companies ...

  7. Which statements about common shareholder rights are FALSE? I. A shareholder may exchange shares to ...

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

  9. Under the Telephone Consumer Act of 1991, a telemarketer must provide which of the following to a called ...

  10. Under the Uniform Securities Act, which of the following are defined as securities ...

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

  12. A margin account has a long market value of $12,000, a debit balance of -$6,000 ...

  13. Which TWO statements are TRUE about writing covered calls? I ...

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

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

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

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

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

  19. How liquid are money market accounts?

  20. What is the difference between passive and active portfolio management?

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 calculation ...

    The correct answer is: a) (I) is incorrect because results that cover a period of less than a year must "not" be annualized. ...
  6. Which of the following are not types of open-end management investment companies ...

    The correct answer is d) Hedge funds are extremely aggressive entities that engage in margin and short-selling.  They are ...
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. Cross Trade

    A practice where buy and sell orders for the same stock are offset ...
  6. Front Running

    The unethical practice of a broker trading an equity based on ...
Hot Definitions
  1. IRS Publication 970

    A document published by the Internal Revenue Service (IRS) that provides information on tax benefits available to students ...
  2. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  3. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  4. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  5. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  6. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
Trading Center