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Answer: Yes, the Standard relating to priority of transactions.
## Explanation **Correct Answer: C - Yes, the Standard relating to priority of transactions.** ### Analysis: Teresa Avila has violated **Standard VI(B): Priority of Transactions** for the following reasons: 1. **Combining personal trades with client trades**: By combining her personal transactions with those of the hedge fund, Avila is effectively getting preferential treatment for her personal account. This violates the requirement that client transactions must take precedence over personal transactions. 2. **Timing advantage**: When she combines her trades with the fund's trades, she ensures her personal account gets executed at the same time and potentially at the same prices as the fund. This gives her an unfair advantage over other clients or investors who might be trading the same securities. 3. **Violation of the spirit of the Standard**: Standard VI(B) requires that investment professionals place client interests before their own. By combining trades, she is treating her personal account as equal to the client's account rather than subordinate to it. ### Why not the other options? - **Option A (No)**: Incorrect because there is a clear violation of CFA Institute Standards. - **Option B (Yes, the Standard relating to misconduct)**: While her actions could be considered misconduct, the more specific and direct violation is of Standard VI(B) - Priority of Transactions. Standard I(D): Misconduct typically involves more serious ethical breaches like fraud, deceit, or dishonesty. ### Key Learning Points: - **Standard VI(B): Priority of Transactions** requires that client transactions take precedence over personal transactions. - Investment professionals must not disadvantage clients by giving preferential treatment to their personal accounts. - Even if the fund requires her to hold recommended securities, she must still ensure her personal trades do not interfere with or take advantage of client trades. - Proper procedure would be to execute her personal trades separately, after client trades have been completed, and at potentially different prices. This scenario illustrates a common ethical dilemma where well-intentioned actions (aligning personal holdings with recommendations) can lead to violations of professional standards if not executed properly.
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Teresa Avila, CFA, is a micro cap investment analyst at a hedge fund. The fund requires Avila to hold any securities she recommends for the fund in her own account as well. Because Avila has such a small account, whenever she trades for her own portfolio she combines the transactions with those of the hedge fund so she is sure to have her account aligned with the fund. Has Avila most likely violated any CFA Institute Standards of Professional Conduct?
A
No.
B
Yes, the Standard relating to misconduct.
C
Yes, the Standard relating to priority of transactions.