Fair Dealing

The standard is built on fairness, not uniformity. Fairness is a process test: no client or group may be systematically advantaged in the timing of information, the price of execution, or access to limited capacity. Uniformity would be commercially impossible, since clients differ in mandate, risk tolerance, account size, fee level and service agreement.

Differentiated service is therefore permitted, provided the tiers are disclosed and available to any client willing to meet the stated criteria. A firm may offer a premium research package with deeper coverage and more frequent contact, but it may not use that package to deliver a recommendation or a rating change earlier than the general client base receives it. The dividing line is timing and access to actionable information, not the depth of the relationship.

Operationally, the critical period runs from the moment an analyst or committee reaches a conclusion to the moment clients can act on it. Every additional hour in that window is an opportunity for selective advantage. Firms compress the window by limiting the number of people who know a recommendation is coming, restricting internal circulation, and setting a fixed publication and distribution time communicated in advance through a written policy.

Simultaneous dissemination is the target: email, portal posting, voice broadcast and adviser notification released together. When simultaneity is imperfect, the firm must document the sequence and prohibit trading or client contact until distribution is complete. Holders of the security are then notified separately of a downgrade, because they face the most immediate action decision, but they may not be given a head start over other clients.

Where supply is scarce, fairness becomes a computation. The accepted approach is a written allocation policy applied mechanically. For a block order that is only partially filled, participating accounts receive shares in proportion to their original order size and all fills execute at the same average price for the day, so that no account absorbs the worst prints. Very small residual allocations may be handled by a disclosed rounding or minimum-lot rule to avoid economically meaningless positions.

For new issues, suitability screening comes first: only accounts for which the security is appropriate participate. Allocation then runs pro rata across that eligible set. Discretion exercised after the fact, or repeated patterns favouring high-fee or proprietary accounts, is the evidence a compliance review or an exam vignette will surface.

Expect scenarios describing a research call routed first to institutional clients, an adviser telephoning the largest account before the report is released, or an IPO book filled by relationship strength. The task is to name the breach precisely and to prescribe remedies rather than simply label conduct unethical.

The standard remedies are a limited pre-release circulation list, a shortened decision-to-dissemination interval, a published distribution policy, simultaneous release, maintenance of an accurate client-holdings list, written trade allocation procedures with pro-rata fills and average pricing, disclosure of available service levels, and periodic review of account performance for allocation bias. Candidates should also recognise the permitted answer: tiered service is acceptable when disclosed and open to all, so long as no tier receives actionable information first.