How does Standard VI(B) priority of transactions work in practice?

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AcadiFi · Accepted Answer

Standard VI(B) — Priority of Transactions — sets a clear hierarchy: client investments take priority over member personal investments. The goal is to prevent front-running, scalping, and preferential treatment.

The full priority order:

1. Clients (highest priority): existing and prospective client orders must be executed first.
2. Employer/firm accounts: proprietary trades and firm positions come second.
3. Beneficial ownership accounts of the member/candidate: your own accounts and those where you have a direct or indirect beneficial interest.

Where does family fit? The critical distinction is beneficial ownership. Accounts of immediate family members are typically treated as your own accounts (beneficial interest presumed) and must follow behind clients and firm. An exception: if the family member is an independent client with their own fee-paying relationship, they are treated as a regular client — no preferential or worse treatment.

Example: Sawgrass Wealth Management has a compliance officer named Elena. She manages a discretionary account for her retired father, who pays standard fees. Elena also has a personal IRA. When a new block trade opportunity in Beacon Industries arrives, the priority is: (1) allocate to all fee-paying clients including father's account pro rata, (2) allocate to firm prop book, (3) only then can Elena trade her own IRA.

Firm policies should include:
- Pre-clearance requirements for personal trades.
- Blackout periods around research publication or large client trades.
- Regular reporting of personal accounts to compliance.

On the CFA exam, if a fact pattern shows a member trading before client orders are filled, that's a VI(B) violation. If a spouse account gets preferential allocation over other clients, that's also VI(B). Family members who are bona fide clients, however, should receive equal treatment.

How does Standard VI(B) priority of transactions work in practice?

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