Standard III (B) - Fair Dealing

Examples of Violation:

• Example 1: An analyst selectively shares the purchase recommendation of a new company with a few clients before the recommendation is sent to all clients.
• Example 2: A company’s pension fund is managed by a bank. The company finds out that the company’s fund managed by the bank has underperformed compared to the bank’s own similar fund. On investigation it is found out that the bank’s pension fund manager gives priority to the bank’s own funds over the client’s funds. For example, when there is a new purchase recommendation for a security, the securities are first purchased for the bank’s own fund and then for the client’s funds.
• Example 3: The investment manager at a money management firm is on the verge of losing a client because of poor performance. In order to retain the client, the investment manager buys certain securities and holds them for a few days without allocating them. After that it allocates the profitable ones to the losing client, and the loss making securities to other clients. This way he is able to improve the performance for this client and manages to retain it.
• Example 4: An investment manager sends new recommendations to all clients by email, but to a selected few he calls and informs personally.
• Example 5: When new issues or secondary offerings are available or are being offered by the firm or if the firm is part of a selling syndicate, all clients for whom the security is appropriate are to be offered a chance to take part in the issue. If the issue is oversubscribed, then the issue is to be prorated to all subscribers. If the firm fails to do so, then it’s a violation of the Standard.