Standard VI(B) Priority of Transactions

what is Standard VI(B) Priority of Transactions?

Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner.

what is the Order of Priority

1. Client transactions

2. Employer/Firm transactions

3. Personal transactions

when is personal trading okay?

• Clients are not disadvantaged.

• The member does not personally benefit at clients' expense.

• All laws, regulations, and firm policies are followed.

• may be undertaken only after clients and the member's employer have had an adequate opportunity to act on a recommendation.

common violations

1. Front-running client orders.

• Buying before a large client purchase to profit from expected price increases.

2. Selling before a client sale.

• Avoiding anticipated losses using knowledge of pending client trades.

3. Tipping family or friends.

• Sharing nonpublic information about recommendations or pending transactions.

Trading in a spouse's or trust account before clients trade.

recommended procedures for members

1. Personal Trading Policies: Establish and disclose firm policies to manage conflicts of interest arising from employees’ personal investments.

2. Limit IPO Participation: Restrict or require preclearance for IPO investments to prevent conflicts, favoritism, or the appearance of taking opportunities away from clients.

3. Restrict Private Placements: Impose strict controls on private placement investments to avoid conflicts, undue influence, and incentives to promote personal holdings.

4. Blackout and Restricted Periods: Prohibit personal trading around client trades to prevent front-running and misuse of client information.

5. Disclosure of Personal Holdings: Require employees to report beneficial ownership interests when joining the firm and at least annually thereafter.

6. Duplicate Trade Confirmations: Require brokers to send trade confirmations and account statements directly to the firm for monitoring purposes.

7. Preclearance of Personal Trades: Review proposed personal transactions before execution to identify and prevent potential conflicts.

8. Enforce Reporting Requirements: Monitor compliance through systematic reporting and supervisory oversight.

9. Disclose Personal Trading Policies to Clients: Provide clear, meaningful information about the firm's personal investing policies to promote transparency and investor confidence.