Ethical and Professional Standards Q74

0. Su Ming Li, CFA, works as a portfolio manager for Peoples Investment Bank. She is asked to analyze certain East Asian equities by her firm, for the purpose of purchasing them. Li talks to Peter Wang, a friend and one of the owners of Dragon Brokerage and Investment Company. He informs her that the East Asian equities are doing very well due to a boom in their respective economies. After thoroughly investigating these equities, she purchases them for her accounts wherever they are suitable. Soon after she gets a call from Dragon to join the firm as a managing partner. Li accepts the offer and resigns from her current job. The week before joining Dragon, she purchases 1500 shares of East Asian equities for her personal account. Once Li begins working at Dragon, she purchases a large block of shares of East Asian equities and allocates them to accounts. Does Li‟s purchase of shares for her personal account violate the CFA Institute Standard of Professional Conduct?

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Option : C
Explanation : Li may have violated the Standard relating to Priority of Transactions when purchasing the shares for her account. She has accepted Dragon’s offer to join as managing partner, has discussed the shares with Wang, and knows, or should know, that she will purchase them for at least some Dragon clients once she begins work at Dragon. Her purchase ahead of Dragon clients might be front-running. Best practice would be to delay her private account purchase until after she purchases for clients.

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