Which CFA Institute Standard is violated when a firm prices trades to favor a particular client without justification?

• A. Standard IV.E Preservation of Confidentiality
• B. Standard V.A Diligence and Reasonable Basis
• C. Code of Ethics and Standards
• D. Standard VI.B Priority of Transactions

Answer: (D)

Priority of Transactions governs how trades must be priced and allocated to ensure fair treatment of clients. If a firm prices trades to favor a particular client without justification, it creates preferential treatment and undermines the obligation to execute and price orders in a non-discriminatory, client-first manner. Legitimate justification for any pricing preference might include factors like order size, timing, liquidity, or prior arrangements, but absent those, favoring one client over others erodes trust, distorts market fairness, and can harm other clients. Therefore, this scenario violates the standard that requires priority of transactions.

Preservation of Confidentiality deals with protecting client information, Diligence and Reasonable Basis requires solid analysis to support investment actions, and the Code of Ethics and Standards is the overarching framework; none specifically addresses giving preferential pricing to a client as directly as Priority of Transactions.