How should I handle conflicts of interest under Standard VI?

Standard VI requires transparency about anything that could bias your professional judgment. Three sub-standards:

Standard VI(A) — Disclosure of Conflicts:

You must make full and fair disclosure of all matters that could impair your independence and objectivity or interfere with your duties to clients.

What must be disclosed:

• Ownership of securities you recommend ("I own shares of this company")
• Board memberships or business relationships with covered companies
• Compensation arrangements tied to recommendations
• Family relationships that create conflicts
• Any financial interest in a recommended transaction

Standard VI(B) — Priority of Transactions:

Transactions for clients take priority over transactions for the employer, which take priority over your personal transactions.

Front-running is the classic violation:

You learn your firm is about to issue a "buy" recommendation on a stock. Before the recommendation is published, you buy shares for your personal account. This is front-running and violates Standard VI(B).

Standard VI(C) — Referral Fees:

You must disclose to clients any compensation or benefit received for referring them to other professionals, and vice versa.

Example: Diego, a portfolio manager, refers clients to a specific tax attorney who pays Diego $500 per referral. Diego must disclose this fee arrangement to every referred client so they can evaluate whether the referral is biased.

Practical tips for compliance:

1. Maintain a personal trading log
2. Pre-clear all personal trades through compliance
3. Observe blackout periods around major recommendations
4. Disclose all outside business activities to your employer
5. When in doubt, disclose

Exam tip: The exam tests whether you can identify a conflict that should be disclosed. Many scenarios involve analysts who honestly believe they are unbiased — but the standard requires disclosure of the conflict itself, regardless of whether it actually affects judgment.

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