Charlie Mancini, CFA, approved flexible terms allowing a hedge fund to trade in SVF mutual funds six hours after US market close, which is prohibited by US regulators. Did Mancini violate any CFA Institute Standards?

• A. No
• B. Yes, with regard to Fair Dealing
• C. Yes, with regard to Fair Dealing and Material Nonpublic Information
• D. Yes, with regard to Material Nonpublic Information only

Answer: (C)

The situation tests how CFA Institute Standards address fair dealing and material nonpublic information in client actions. Granting a hedge fund flexible terms to trade in SVF mutual funds six hours after the US market closes—despite regulator prohibitions—creates an improper advantage for that client and undermines equal treatment of all clients. That is a breach of Fair Dealing because you must treat all clients fairly and avoid giving one client access or terms not available to others, especially when those terms rely on or circumvent regulatory constraints.

At the same time, there is a nonpublic information element here. If Mancini possessed information about the regulatory stance or potential changes that hadn’t been publicly disclosed, and used that information to structure or justify the terms for the hedge fund, it would involve Material Nonpublic Information—using information not available to the public to influence trading arrangements for a client.

So the action violates both Fair Dealing and Material Nonpublic Information, making that option the best answer.