Explanation:
According to Standard VI(B) - Priority of Transactions, family accounts that are client accounts must be treated like any other firm account. They should neither receive special treatment nor be disadvantaged due to the family relationship. If a member or candidate has beneficial ownership in the account, they may be subject to preclearance or reporting requirements. Mak should have treated his brother's fee-paying account like any other firm account without disadvantaging it. Therefore, his actions are inconsistent with the Standard relating to priority of transactions.
Key Takeaway: Members must ensure that personal or family accounts are not given preferential treatment or disadvantaged, adhering to the same standards as other client accounts.
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Michael Mak, CFA, a portfolio manager, conducts comprehensive research and purchases Advance One Tech (AOT) stock for all suitable client portfolios. Subsequently, he buys AOT shares for his brother's fee-paying account, in which he holds beneficial ownership. After a month, AOT's stock price declines significantly, causing substantial losses for all clients. Are Mak's actions consistent with the CFA Institute Standards of Professional Conduct?
A
Yes, Mak's actions are consistent with all applicable Standards.
B
No, Mak's actions violate the Standard regarding priority of transactions.
C
No, Mak's actions violate the Standard concerning diligence and reasonable basis.
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