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Answer: Priority of Transactions
## Explanation **Analysis of Yip's actions:** 1. **Referral Fees (Standard VI(C))**: Yip is not violating this standard because she is not receiving referral fees from third parties for recommending their services. She is receiving direct commissions from the mutual fund companies for selling their products, which is standard compensation for sales agents. 2. **Disclosure of Conflicts (Standard VI(A))**: Yip likely violates this standard because: - She receives different commission structures for front-end vs. back-end load funds (higher immediate commission for front-end loads) - She has a financial incentive to recommend front-end load funds over back-end load funds - She does not provide details of her compensation structure to clients, only stating she receives a commission - The fact that she invests 20% of her commission in the same fund could create an additional conflict or be misleading 3. **Priority of Transactions (Standard VI(B))**: Yip least likely violates this standard because: - This standard primarily deals with putting client interests before personal interests in trading - Yip's actions involve sales recommendations and compensation disclosure, not personal trading ahead of clients - While she mentions investing 20% of her commission, this is presented as proof of confidence rather than personal trading that disadvantages clients **Key points:** - Yip fails to adequately disclose the specific conflicts arising from her compensation structure - The different commission rates for front-end vs. back-end load funds create a material conflict that should be fully disclosed - Her statement about investing 20% of her commission could be misleading or create additional conflicts - Priority of Transactions violations typically involve actual trading activities where personal transactions are executed before client transactions, which is not evident in this scenario
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Yip Wai Yin, a CFA candidate, is an independent mutual fund sales agent. For every front-end load product she promotes, Yip receives a portion of the front-end fee as commission at the time of sale. For every back-end load fund she sells, Yip receives a smaller commission paid at the end of the year. Yip always informs her clients that she is paid a commission as an agent, but does not provide details of the compensation structure. When pitching her favored front-end load product line she tells clients 20% of her commission is always invested in the same fund as proof of her confidence in the fund she recommends. Which Standard does Yip least likely violate?
A
Referral Fees
B
Disclosure of Conflicts
C
Priority of Transactions