5 days seems fishy to me too. If you know of a client trade that far in advance, wouldn’t it still be front-running to buy for yourself? I went with the $5000K. Not that confident though; my thinking was, as long as you’re not violating any standards with your trade, you don’t really NEED to have prior-approval from your firm to carry it out, right? So even though the $5000k seems like a high minimum, I don’t think a firm would have to have this type of policy to begin with (as long as other trading rules are sufficient).
ok i will trade DEEP OUT OF THE MONEY OPTIONS for under 5000k. Guess what my profit will be
comp_sci_kid Wrote: ------------------------------------------------------- > ok i will trade DEEP OUT OF THE MONEY OPTIONS for > under 5000k. Guess what my profit will be Responding to me? Anyway, my point being, as long as you’re not violating some other ethical standard, I don’t think your firm needs to have a rule for pre-approving it.
5 days doesn’t work…I think it is 5k min, there is a materiality component in preclearing at most places even though most are strict and preclear all trades. No way you have to search what was traded within the last 4 days across the firm to see if you can place a trade- it just wouldn’t be possible to track.
as i said previously MANY firms have rules about trading before a client.
so, which is worse? Front Running 6 days before a client trades or buying $4999 worth of options? I think the true answer is very unclear.
sh34 Wrote: ------------------------------------------------------- > so, which is worse? > > Front Running 6 days before a client trades or > buying $4999 worth of options? > > I think the true answer is very unclear. IMO, there’s nothing wrong whatsoever with making a $4999 trade of any kind, as long as you’re not front running, acting on inside info, etc. etc. I’m sure a lot of firms have these types of pre-approval rules, but are they required by the code & standards?
if my memory is not failing me, the 5-day question was referring to front-running “discretionary accounts”. you shouldn’t front run discretionary nor non-discretionary accounts to prevent your taking advantage of client’s knowledge and violating the priority of transactions… that’s where the trick was IMO and that’s why i didn’t select it
how about the soft dollar, but best execution one?
cfamag Wrote: ------------------------------------------------------- > if my memory is not failing me, the 5-day question > was referring to front-running “discretionary > accounts”. you shouldn’t front run discretionary > nor non-discretionary accounts to prevent your > taking advantage of client’s knowledge and > violating the priority of transactions… that’s > where the trick was IMO and that’s why i didn’t > select it you cannot possible front run non-discretionary accounts 
5 days was the only answer that was fully in the CFAI spirit. There is no $ limit on the trade approvals, therefore the $5K is out, also the double confirmation should be done for all accounts and not just a random sample.
DeLaSoul Wrote: ------------------------------------------------------- > how about the soft dollar, but best execution one? since they confirmed best execution i had is as no violation.
sh34 Wrote: ------------------------------------------------------- > I had to guess this one. > > I was unsure about the ‘5’ days… 5 days seemed > a little too questionable. Why not 1 week or 1 > month? > > I picked get permission for any trade about $5000. > Thus, as most banks need pre-trade clearance… I > thought it may be fair and any for trade with a > relatively ‘material’ amount. If the decision time to make a trade was less than 5 days, how could you even enforce the policy?
i disagree there have been numerous examples by the institute in its textbooks of non-discretionary accounts with clients that just seem to know what stocks to buy… if you get an order from such an account but place a trade before the account gets the benefit of the upside, that’s called front-running
guys, this was one of the easy ones if you ask me. the 5k idea does not make sense at all as you could simply do, say, 10 trades w/ $4,999 each and you would not have to report anything… So the best pick is the 5-day rule. No doubts here…
it was definitely 5 days. i work at a firm that modeled most of its policies on CFA ethics (scary? woah), and if you trade within a certain time prior to a recommendation or client buying, you 1) get your wrist slapped if knew you knew about the recommendation and 2) have the trade broken (i.e., you sell at current market prices to remove the appearance of a conflict) whether you knew or not. you *cannot* disadvantage the clients in any way whether intentional or unintentional. the 5000 rule makes no sense, as noted the random sample rule also makes no sense. compliance should be getting duplicate copies anyway, but if they arent, a lot can slip by with random checks. dont remember the last one.
voted for 5-day
oskigo Wrote: ------------------------------------------------------- > DeLaSoul Wrote: > -------------------------------------------------- > ----- > > how about the soft dollar, but best execution > one? > > > since they confirmed best execution i had is as no > violation. Yeah, that was my first instinct. But the way they worded it, it seemed like best execution was just an afterthought for the guy.
The material is just not clear on this one. Both blackout periods and preclearance are both listed in Ethics section regarding this topic and could sway the ansewr either way. I was going through this one last night because it is bugging me. 5 days seems entirely too long before, and 5000 seems arbitrary as well. Who knows…
DeLaSoul Wrote: ------------------------------------------------------- > Yeah, that was my first instinct. But the way they > worded it, it seemed like best execution was just > an afterthought for the guy. does it matter if it is an afterthought as long as he gets it?