📖 Standard III(B)：公平交易（Fair Dealing）

I. Standard Text

Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities.

II. Core Interpretation

2.1 Fair ≠ Equal

This is the most tested distinction for III(B):

• Fair treatment ≠ Equal treatment
• Not all clients must receive identical information or services at the exact same moment
• However, discrimination is prohibited — you cannot deliberately delay or skip clients because of small account size, low commissions, etc.
• Tiered service is permitted, provided there is full disclosure and client consent

2.2 Scope of Application

III(B) applies across three key scenarios:

2.3 Fairness in Information Dissemination

• When investment recommendations change, notify all applicable clients simultaneously or as quickly as possible
• Time gaps are permitted only for operational practicality, not subjective selective delay
• Example: Notifying large clients first, then small clients → violation

III. Key Application Scenarios

Scenario 1: Recommendation Release Order

Case: Analyst Zhang independently completed a buy recommendation report. He first called three major clients, then sent the report to all clients 30 minutes later via mass email.

Judgment: ❌ Violates III(B). Unless there are operational infeasibility factors, all clients must receive the recommendation within roughly the same timeframe. A 30-minute delay constitutes unfair treatment.

Correct Approach: Mass email at a scheduled time, or notify all relevant clients simultaneously through a systematic process within a very short window.

Scenario 2: Limited IPO Share Allocation

Case: A brokerage receives 1,000,000 shares of a hot IPO, with total client demand of 3,000,000 shares. Manager Wang allocates 800,000 shares to her personally-managed top-performing accounts and distributes the remaining 200,000 shares pro-rata to other clients.

Judgment: ❌ Violates III(B). Allocations must follow a pre-established, fair, and transparent allocation policy (e.g., pro-rata based on order size). Favoring certain accounts because they are "more important" is prohibited.

Correct Approach: 1. Establish a written allocation policy (e.g., pro-rata based on subscription amount) 2. Disclose the policy to all clients in advance 3. Execute strictly per policy, retaining allocation records

Scenario 3: Tiered Service

Case: ABC Asset Management provides "Platinum Clients" with real-time trade alerts and "Standard Clients" with daily summary reports. The firm clearly disclosed this differentiation in the account opening agreement.

Judgment: ✅ Does NOT violate III(B). Different service levels are permitted as long as differences are fully disclosed in advance and clients give informed consent.

Key Point: Disclosure — differentiated services without disclosure = violation.

Scenario 4: Block Trade Allocation

Case: Manager Liu simultaneously buys 100,000 shares of a stock for multiple clients, with actual fill prices of $50 (day's low), $51, and $52. He allocates all 50,000 shares filled at $50 to a relative's account and distributes the rest to other clients.

Judgment: ❌ Violates III(B). The average price of block trades should be allocated proportionally to client orders. Concentrating the most favorable prices on specific clients is prohibited.

Scenario 5: Partial Fill Handling

Case: Three clients each order 5,000 shares (15,000 total), but only 9,000 shares are filled. The manager allocates 4,000 shares each to two "old clients" and only 1,000 shares to a new client.

Judgment: ❌ Violates III(B). Partial fills should be allocated pro-rata based on each client's order proportion (here, 1/3 each → 3,000 shares each), not based on relationship.

IV. Distinguishing from Related Standards

V. Compliance Best Practices

1. Establish written allocation policies: Define rules for IPOs, hot issues, partial fills, etc.
2. Unified information dissemination: Use mass email, automated alerts to ensure simultaneous notification
3. Retain allocation records: Complete written records of trade allocations for compliance review
4. Disclose tiered services: Different service levels must be clearly stated in client account documents or agreements
5. Periodic compliance review: Audit allocation fairness at least annually

VI. Red Flags

• Certain client types always receive recommendation changes first
• Hot IPO allocations heavily concentrated in a few accounts
• No written allocation policy, or actual practice inconsistent with policy
• Partial fill allocation ratios significantly diverge from order ratios
• No disclosure of tiered service differences

VII. Practice Questions (5 Questions)

Question 1

Analyst Li completed an upgrade rating report after market close on Friday. On Monday morning, he first sent it to the firm's five largest institutional clients and only mass-emailed it to remaining clients in the afternoon. Does this violate III(B)?

A. No violation, because large clients contribute more commissions B. No violation, because the report has not yet been reflected in the public market C. Violation, unless the delay was due to operational reasons rather than subjective choice D. Violation, because analysts should never communicate with any client in advance

Answer: C — Unless the delay is due to operational reasons (e.g., mass email system requires time), subjectively choosing to delay notification to certain clients constitutes unfair dealing.

Question 2

Which of the following is LEAST likely to violate Standard III(B)?

A. Allocating hot IPO shares based on client asset size B. Sending mass emails to higher-fee clients first, then to regular clients C. Disclosing in account-opening documents that platinum clients enjoy priority notification rights D. Allocating the best fill prices from the same trade block entirely to the firm's flagship fund

Answer: C — With full disclosure, tiered service is permitted. A is unfair without prior disclosure; B is selective notification; D is unfair allocation.

Question 3

Regarding Standard III(B) Fair Dealing, which statement is correct?

A. All clients must receive investment recommendations at the exact same moment B. Fair dealing means all clients must be treated equally C. Different service levels are permitted with full disclosure D. Fair dealing applies only to investment recommendations, not trade execution

Answer: C — Tiered service is permitted with disclosure (C correct). A is too absolute (reasonable sequencing allowed). B confuses "fair" with "equal". D is incorrect — III(B) covers both recommendations and trade execution.

Question 4

Manager Wang receives a client redemption order for 10,000 shares of a stock, while his own personal account also holds the same stock. Which approach BEST complies with III(B) and VI(B)?

A. Sell the client's position first, then sell personal position B. Sell both client and personal positions simultaneously at market price C. Sell personal position first, then sell client position D. Sell only the client's position, hold personal position for a better price

Answer: A — VI(B) requires client transactions to have priority over personal transactions. III(B) requires fair allocation among clients (only one client here, so no inter-client fairness issue). Therefore, execute for client first.

Question 5

A brokerage receives 200,000 shares of a hot IPO. Four clients each subscribe for 100,000 shares (total demand: 400,000 shares). How should the brokerage allocate to best comply with III(B)?

A. By order of account opening date B. First subscriber gets full allocation, rest pro-rata C. Each client receives 50,000 shares (pro-rata by order size) D. Pick the two clients with highest commissions, allocate 100,000 each

Answer: C — Pro-rata allocation is the fairest approach. Each client's order represents 25% of total demand → each receives 50,000 shares. A/B/D all introduce non-fairness factors.

VIII. Key Takeaways