What are cross-transactions?

Cross-transactions specifically refer to transactions wherein a financial adviser effects a trade between two accounts that are affiliated in some way, often involving different clients. In this context, option B correctly identifies cross-transactions as those occurring between a client account and affiliated accounts, such as those where the adviser is managing both accounts.

This practice can present certain compliance considerations and regulatory scrutiny, as the adviser needs to ensure that the transactions are made in the best interests of all clients involved. Because both accounts are managed by the same adviser or affiliates, there is a potential conflict of interest that must be carefully navigated to comply with fiduciary standards and ensure fair dealing.

On the other hand, the other options do not accurately capture the essence of cross-transactions. Transactions between multiple clients (option A) could involve separate trades that do not necessarily benefit or involve both parties directly, and therefore do not represent a cross-transaction in the compliance context. Buying and selling between different advisers (option C) doesn’t pertain to the relationship between client accounts managed by a single adviser or their affiliates, and transactions involving only mutual funds (option D) restricts the broader definition of cross-transactions, which can apply to various account types and securities.