"morality" exercise:Misrepresentation

C is correct because Yip’s investments do not adversely affect the interest of the clients and therefore do not violate the Priority of Transactions requirement. A candidate having the same investment positions does not always create a conflict of interest, and in some instances having an aligned investment portfolio can be beneficial to the client. By not detailing the commission structure to her clients, Yip does not disclose the potential reason for her favoring front-end load funds over back-end load as the commission is higher and is paid immediately rather than at the end of the year and is in violation of Standard  VI(A)–Disclosure of Conflicts. Yip also does not disclose the commission structure in detail, which could impair her independence when recommending frontload mutual funds rather than back-end load mutual funds to her clients, a violation of Standard VI(C)–Referral Fees. 

A is incorrect because by not detailing the commission structure to her clients, Yip does not disclose the potential reason for her favoring front-end load funds over back-end load as the commission is higher and is paid immediately, rather than at the end of the year. 

 B is incorrect because Yip does not disclose the commission structure in detail, which could impair her independence when recommending front-load mutual funds rather than back-end load mutual funds to her clients.

B is correct because Standard III(E)–Preservation of Confidentiality has not been violated. The analyst has a personal relationship with the officer of the auto company, and he is not a current, former, or prospective client, so there is no obligation for the analyst to maintain client confidentiality. However, the analyst did violate Standard I(C)–Misrepresentation when she represented another analyst’s work as her own. In addition, the analyst also violated Standard  II(A)–Material Nonpublic Information by including data that were material and nonpublic in her research report on sales figures. 

A is incorrect because Standard I(C)–Misrepresentation was violated by the analyst when she represented another analysts research report as her own. 

 C is incorrect because Standard II(A)–Material Nonpublic Information was violated when the analyst included data that were material and nonpublic in the research report on sales figures.