Ethics - Fair Dealing Vs. Priority of Transactions

CFA Level I Ethics
#1

Hello,

I am trying to figure out the differences between Standard 3(B) Fair Dealing and Standard 6(B) Priority of Transactions. To me, they seem very similar so I was wondering if anyone has any insight on how to tell them apart?

From what I have seen on this forum and others is that Fair Dealing deals with actions taken among the client base (large clients vs. small clients). Alternatively, Priority of Transactions seems to deal with action taken for all clients (placing personal trades before any client trade).

I mainly get tripped up when looking at oversubscribed IPOs as it seems like this topic could fall into Fair Dealing or Priority of Transactions. For example, allocating a larger share of the “hot issue” to larger clients is an obvious Fair Dealing violation but what about retaining some of the issue for personal use? Would that fall under Fair Dealing or Priority of Transactions?

Thanks for your help!

#2

A short summary on this issue may be like this;

Fair Dealing: Treat all your clients equally, there should be no preferrential treatment. If you have a hot issue, split that on a pro rate basis among all clients, if you have a relative as a client who does not benefit you, treat the relative like everyother client.

Priority of Transactions: the general rule is transactions for your clients will all always a have a higher priority than transactions for your personal account. If you do it any other way, you will violate this standard.

Hope it helps.

1 Like
#3

Firstly remember treating clients fairly does not mean equally. There will be different levels of service and that is okay as long as those clients, for example, pay a premium for that service.

Fair dealing is larely to do with clients of the firm wheras priority of transactions can include you, your employeer, family, client etc. (generally speaking)