Lesson 3 of 6 · All lessons in this module
- How to work through an ethics caseVideo lesson
- Professionalism: law, independence, honesty and competence
- Markets and conflicts: inside information, manipulation, front-running and fees
- Duties to clients: loyalty, fair dealing, suitability, performance and confidentiality
- Duties to employers: loyalty, outside pay and supervision
- Research, communication, records and the CFA designation
Lesson 3 of 6 · 15 min
Markets and conflicts: inside information, manipulation, front-running and fees
These cases ask whether someone used an information or timing advantage at the expense of the market or of clients, and whether every incentive that could bias advice was avoided or clearly disclosed.
In short
- II(A) Material Nonpublic Information: information overheard in a public place is still nonpublic; piecing together clues about a deal is not mosaic theory; an issuer may not tip selected analysts, even with general hints.
- II(B) Market Manipulation: faking investor interest (e.g. invented shareholders to meet listing rules) is information-based manipulation, whatever the later share performance.
- VI(A) Avoid or Disclose Conflicts: payments from sub-advisers or product providers must be avoided or disclosed prominently and in plain language.
- VI(B) Priority of Transactions: clients first. Front-running, tipping friends ahead of a fund's orders and cherry-picking block-trade allocations are violations even without measurable client harm.
- VI(C) Referral Fees: any benefit paid for referrals (parties, gifts, fee discounts) must be disclosed to clients and prospects.
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