Explanation:
Jefferson did not violate the GARP Code of Conduct. The GARP Code of Conduct allows fund managers to execute trades based on the general investment strategy disclosed to clients without needing to inform them of every individual trade in advance. The described trading strategy (buying an asset and shorting its futures) is a standard investment practice rather than an act of market manipulation, meaning there is no ethical breach as long as it aligns with the fund's general mandate known to the clients.
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Q.281 Chris Jefferson, FRM, is the manager of a hedge fund. Over the last 3 days, he has been investing the hedge fund by purchasing significant quantities of ABC’s stock while simultaneously selling the three-month futures contract (i.e. initiating a short position in it). Although his clients are aware of the fund's general investment strategy to generate earnings, Jefferson did not inform them of the trades. One of the following statements is most likely correct. Which one?
A
Jefferson violated the GARP Code of Conduct.
B
Jefferson did not violate the GARP Code of Conduct.
C
Manipulated the price of a publicly traded security hence violated the Code of Conduct.
D
Violated the GARP Code of Conduct by failing to keep his clients in the loop regarding the transactions before they occurred.
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