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Susan Smart, CFA, is about to change her “buy” recommendation on RollinsCo to “sell.” RollinsCo had been growing rapidly over the past year, but Smart believes the growth potential is now gone. Smart sells the shares held in her discretionary client accounts and in her own personal account before issuing her report. According to the Standards that concern fair dealing and priority of transactions, Smart violated:

A both of these Standards.

Smart violated both Standards. Smart violated Standard III(B) Fair Dealing because she not deal fairly and objectively with all clients and prospects when disseminating investment recommendations, giving priority to some of the firm’s clients by trading for her clients first before issuing the report. She also sold her own shares before issuing the report, which violated Standard VI (B) Priority of Transactions. Smart did not give clients an opportunity to react to and benefit from her recommendation before she personally benefited from her research.

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