Teresa Avila, CFA, is an investment analyst at a hedge fund. The fund requires Avila to hold any securities she recommends for the fund in her own account as well. Because Avila has such a small account, whenever she trades for her own portfolio she combines the transactions with those of the hedge fund so she is sure to have her account aligned with the fund. Has Avila most likely violated any CFA Institute Standards of Professional Conduct?

• A. No.
• B. Yes, related to Misconduct.
• C. Yes, related to Priority of Transactions.
• D. Yes, related to Confidentiality.

Answer: (C)

Priority of Transactions is about giving client trades priority over your own, so you don’t time or structure personal trades to benefit yourself at the expense of clients. Here, Avila’s practice of combining her own trades with the hedge fund’s trades to ensure her account stays aligned with the fund creates a situation where personal trading could take the place of, or influence, client orders. Even with good intentions, this blurs the line between personal and client transactions and raises the risk that her own interests or timing could trump client interests, which the Standards prohibit. The issue isn’t about confidentiality or general misconduct; it’s about ensuring client trades are treated with priority and not subordinated or piggybacked onto personal trades.