CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

Standard VI(B) Priority of Transactions Explained

Updated 7 October 2026 · Fact-checked

Standard VI(B) says investment transactions for clients and employers must have priority over transactions in which you are the beneficial owner. You must not trade ahead of clients (front-running) or use your position for personal gain. To solve questions, check who traded first, who benefited, and whether client interests came first.

Understand Standard VI(B): Priority of Transactions

Standard VI(B) is about order of service. When you act for clients and your employer, their trades come first. Your own trades come after. The official wording is: "Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner."

The reason is trust. You often know what clients are about to buy or sell, and large orders move prices. If you trade for yourself first, you profit from information that belongs to the client. That is front-running. The client gets a worse price and you gain. This is the core harm the Standard prevents.

The Standard also covers personal trading more broadly. You must not take investment opportunities that are suited to clients, and you must not let your own trades disadvantage clients. Beneficial ownership is wide. It can include accounts where you have a financial interest, such as family accounts you influence, not just accounts in your own name.

The Standard does not ban personal investing. It does not ban you from owning securities that clients hold. It requires that client trades are not disadvantaged. Firms usually add compliance procedures: pre-clearance of personal trades, blackout or restricted periods around client trades, holding periods, reporting of personal holdings and trades, and restricted lists. You should know these because exam questions test whether a firm's or member's actions fit them.

Be careful with the related idea of limited offerings such as IPOs and private placements. Taking these for yourself can deprive clients of the opportunity. The Standard requires that clients' interests come first. The guidance on Standard VI(B) also recommends that firms require employees to get prior approval from their employer before taking part in IPOs or private placements. That is a recommended compliance procedure, not a requirement written into the Standard itself. The exam usually asks whether the member put clients first, not whether the trade was profitable.

Key formulas to remember

Standard VI(B) core rule: Client and employer transactions > Member or Candidate's personal transactions; Official wording: investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner.
Front-running test: Personal trade placed before a client order that you know about, for gain = violation; The violation is trading ahead of clients on knowledge of their pending orders. Timing and knowledge are the key facts.
Typical compliance procedures: Recommended firm procedures: pre-clearance + restricted periods + reporting of personal trades + prior employer approval for limited offerings (IPOs, private placements); These are recommended practices from the guidance on Standard VI(B), not wording of the Standard itself. Not having one does not by itself prove a violation, but ignoring client priority does.
Beneficial ownership: Beneficial owner = person with a financial interest in the account, directly or indirectly; Trades in accounts you control or benefit from can fall under the Standard, not just accounts in your own name.

How to solve Standard VI(B): Priority of Transactions questions

Use this method for any VI(B) question. It keeps you focused on order, knowledge and benefit.

1Identify whose trades are involved: client, employer, and the member's own or beneficially owned accounts.
2Put the trades in time order. Ask whether the personal trade came before, with, or after the client trade.
3Ask what the member knew. Did they know of a pending client order or a recommendation about to be released?
4Check for harm or advantage: did the client get a worse price, lose an opportunity, or did the member gain from client trading?
5Check for safeguards: if a limited offering was involved, prior employer approval is a recommended procedure that helps protect client priority. Also check whether pre-clearance was obtained.
6Apply the Standard: if client trades had priority and no client was disadvantaged, it is likely compliant. If the member traded ahead or took the client's opportunity, it is a violation.
7Pick the option that restores client priority, such as cancel the personal trade or put clients first and involve the employer through its approval process.

Quickest way: Who went first, and who gained?

When to use it: Use this when you have about 90 seconds and the stem describes personal and client trades.

Find the personal trade and the client trade in the stem.
If the personal trade came first with knowledge of the client trade, call it front-running and a violation.
If the personal trade came after client orders were filled and the client lost nothing, lean to compliant.
Eliminate options that say personal trading is always banned, or that disclosure alone fixes a front-running trade.
For IPOs or private placements, choose the option that gives clients priority and involves the employer, such as seeking its prior approval. Eliminate options that take the opportunity first or ignore clients.

Common mistakes in Standard VI(B): Priority of Transactions

Thinking any personal trading is a violation.
The word priority sounds like a ban.
Fix: Remember the Standard allows personal trades that do not disadvantage clients. It sets order and fairness, not prohibition.
Assuming disclosure cures front-running.
Standard VI(A) stresses disclosure, so students apply it everywhere.
Fix: Under VI(B), disclosure does not excuse trading ahead of clients. Client trades must come first, so disclosure cannot cure a priority breach.
Ignoring accounts the member does not own in name.
Students read personal as only my own account.
Fix: Check beneficial ownership. Accounts where you have a financial interest can count.
Missing the knowledge element.
Students look only at trade timing.
Fix: Ask whether the member knew of the pending client trade or recommendation. Knowledge plus advantage points to front-running.
Treating IPO purchases as fine because the member paid fair price.
Price fairness feels like the whole test.
Fix: Consider whether the opportunity belonged to clients and whether clients were put first. Employer approval is a recommended safeguard, but client priority is the test.
Confusing VI(B) with II(A) on material nonpublic information.
Both involve trading and information.
Fix: If the issue is trading ahead of your own client orders, choose VI(B). If it is trading on inside information about a company, think II(A).

Worked examples

Example 1

A portfolio manager at a global asset manager knows that her fund will buy a large block of a mid-cap stock in the morning. The day before, she buys shares in the same stock for her personal account. Which is most accurate? A) She violated Standard VI(B) because she traded ahead of her client's order. B) She complied with Standard VI(B) because the purchase was at the market price. C) She complied with Standard VI(B) if she discloses the trade to her employer afterwards.

Show the solution

Identify the trades: a pending client (fund) order and a personal purchase.
Order them: the personal trade came first, the day before.
Check knowledge: she knew about the large pending client order.
Check advantage: the large client buy may push the price up, so she benefits at the client's expense.
This is front-running. Market price (B) and later disclosure (C) do not cure it, since client trades must have priority.

Answer: A

Example 2

An analyst at a wealth manager wants to buy shares in a private placement that is also suitable for several clients. She has not told her employer. What should she do to comply with Standard VI(B)? A) Buy the shares first, then tell her employer. B) Make sure clients are not disadvantaged and seek her employer's approval before taking part. C) Buy the shares only if the price is below what clients would pay.

Show the solution

The opportunity is a limited offering suitable for clients, so personal participation could take opportunities from them.
Standard VI(B) requires that client interests come first. Guidance recommends seeking prior employer approval before taking part in a limited offering, which helps protect client priority.
Option A takes the opportunity first and tells the employer after the trade, so client priority is not protected.
Option C focuses on price, which does not address client priority or involve the employer.
Option B gives clients priority and involves the employer before she acts, so it is the best answer.

Answer: B

Exam tips

Look for the words before, ahead of and knew. They signal front-running.
Do not pick answers that say personal trading is never allowed. VI(B) allows it if clients come first.
For IPO and private placement stems, choose the option that puts clients first and involves the employer through prior approval. Prior approval is recommended procedure, but client priority is what the Standard requires.
Match the Standard to the issue: VI(B) for personal versus client trades, VI(A) for disclosure of conflicts, II(A) for inside information.
With three options, eliminate the one that excuses the trade because of price or later disclosure.

Practice questions from Guidance for Standard VI: Conflicts of Interest

Standard VI(B): Priority of Transactions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Standard VI(B): Priority of Transactions: frequently asked questions

What is front-running under CFA Standard VI(B)?

Front-running is trading for yourself ahead of a client or employer order that you know about, to profit from the expected price move. It breaches Standard VI(B) because your interest comes before the client's. The remedy is to give client trades priority.

Can a CFA charterholder trade for their own account?

Yes. Standard VI(B) does not ban personal investing. The trades must not disadvantage clients or employers, and client transactions must have priority. Firm procedures such as pre-clearance and restricted periods help show this.

How is VI(B) different from VI(A)?

Standard VI(A) covers avoiding or disclosing conflicts of interest. Standard VI(B) covers the order of transactions, so client and employer trades come before personal ones. Disclosure under VI(A) does not fix a priority breach under VI(B).

What compliance procedures support Standard VI(B)?

Common firm procedures are pre-clearance of personal trades, restricted or blackout periods around client trades, and reporting of personal holdings and trades. Guidance also recommends prior employer approval before taking part in a limited offering such as an IPO or private placement. These are recommended practices that help ensure client priority, not wording of the Standard itself.