Explanation

Alice Chan has violated Standard VI(B): Priority of Transactions.

Key Points:

1. Standard VI(B) - Priority of Transactions: This standard requires that investment transactions for clients and employers must have priority over transactions in which a member or candidate is the beneficial owner.

2. Violation Details:

   • Chan executed trades for her sister's account (a family member's account) after executing trades for clients
   • Even though she has no beneficial interest in her sister's account, family members' accounts are generally considered to have the same priority as the member's own account
   • The standard applies to accounts in which members or candidates have a direct or indirect beneficial interest

3. Why not other options:

   • A. Disclosure of conflicts: While disclosure might be relevant, the primary violation is the order of transactions
   • C. Diligence and reasonable basis: There's no indication that her research was inadequate; the issue is with the transaction priority

4. Additional Considerations:

   • The fact that the stock declined and caused losses doesn't change the violation
   • The violation occurred when she executed her sister's trade after client trades
   • Family member accounts should be treated with the same priority as the member's own account

Correct Answer: B - Chan violated the Standard relating to priority of transactions by executing her sister's trade after client trades.