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B. Priority of transactions
#analyst-notes #and-actions #code-of-ethics-and-standards-of-professional-conduct #vi-conflicts-of-interest
Procedures for compliance

You should encourage your firm to prepare and distribute a Code of Ethics and compliance procedures, applicable to principals and employees, emphasizing their obligation to placing the interests of clients above personal and employer interests. The form and content of such compliance procedures depend on the size and nature of each organization and the laws to which it is subject. In general, however, the code and procedures should do the following:

  • Limited participation in equity IPOs.
    Members and candidates should not benefit from the position that their clients occupy in the marketplace - through preferred trading, the allocation of limited offerings, and/or oversubscription.

  • Restriction on private placements.
    As participants in private placements have an incentive to recommend these investments to clients, members and candidates should not be involved in these transactions, which could be perceived as favors or gifts designed to influence future judgment or to reward past business deals.

  • Establish blackout/ restricted periods.
    Managers or employees involved in the investment decision-making process should be prevented from initiating trades in a security for which their firms have a pending "buy" or "sell" order within a specific period before the order is executed or cancelled. They should not be allowed to do "front running."

  • Reporting requirements.

    • Disclosure of holdings in which the employee has a beneficial interest.
    • Providing duplicate confirmations of transactions. Investment professionals should ask their brokers to supply duplicate copies to their firms of all their personal securities transactions and copies of periodic statements.
    • Pre-clearance procedures. Investment professionals should clear all personal investments, to identify possible conflicts before the execution of personal trades.

  • Disclosure of policies.
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