Question #31
Reading: Reading 42.4 Standards of Professional Conduct Guidance for Standards IV
PDF File: Reading 42.4 Standards of Professional Conduct Guidance for Standards IV.pdf
Page: 13
Status: Correct
Correct Answer: A
Question
Brendan Duval works as a research analyst for Toby Securities. Duval recommends changing a recommendation from "sell" to "buy" on Dalton Company. His firm, which manages several mutual funds, may be interested in buying Dalton's stock. He also manages the retirement account that his parents established with Toby. Duval wants to buy shares of Dalton's stock because it is an appropriate investment for his parent's retirement account and obtains approval from his employer to do so. Duval is also thinking about personally investing in Dalton stock. According to CFA Institute Standards of Professional Conduct, which of the following best describes the priority of transactions? Duval should give:
Answer Choices:
A. Toby's clients and his parent's account equal priority, followed by his employer, and then his personal account
B. priority to Toby's clients and his employer concurrently, followed by his parent's retirement account, and finally his personal account
C. priority of transactions to Toby's clients, followed by his employer, then his parent's retirement account, and finally his personal account
Explanation
According Standard VI(B) Priority of Transactions, Duval should give transactions for
clients and employers priority over his personal transactions. Because his parent's
retirement account represents a client account at Toby, Duval should treat this account
just like any other firm account. His parent's retirement account should neither be given
special treatment nor disadvantaged because of an existing family relationship with Duval.
If Duval treats his parent's retirement account differently from other accounts at Toby, he
would breach his fiduciary duty to his parents.