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Basic Question 1 of 7
When an investment professional has a limited number of shares of an initial public offering to distribute, which of the following allocation methods violate CFA Institute's Standards of Professional Conduct?
II. First fill the orders of the clients who have generated the most commissions during the past year.
III. First fill the orders of those who have been clients of the investment professional for the longest period of time.
I. First fill the orders of individual clients, and then fill the orders of institutional clients.
II. First fill the orders of the clients who have generated the most commissions during the past year.
III. First fill the orders of those who have been clients of the investment professional for the longest period of time.
User Contributed Comments 10
| User | Comment |
|---|---|
| kaliokale | This is clear. Should always treat everyone fairly. |
| Analizer | Kaliokale is right. The principle of Fair Dealing is being tested. Everyone should be treated fairly. |
| mrushdi | correct,everyone should be treated fairly, except for himself and family members. |
| AUAU | Easy question. But what is "family member" or "immediate family member"???? How about brother, father. mother, wife, children????? |
| dblueroom | should be allocated pro rata, and I believe personal and immediate family are excluded from IPO (or hot issue), unless your immediate family is a client (so should be treatly as any other client). |
| nabilhjeily | please explain this pro rata issue |
| johntan1979 | In reality, the institutional clients and individuals with accounts above $1 million gets the IPOs before anyone else. |
| Inaganti6 | But this is CFA land, not reality, where finance nerds pontificate on what happens in the real world through reading and writing about what happens in the real world. |
| fabsan | Pro-Accounts orders are normally filled after Non-Pro Account on secondary market. I Wonder why that will be different for IPO. |
| UcheSam | @Johntan1979, then reality is far from the Code and Standard. Pro-rata basis should be used and it will still swing towards institutional clients base accounts value. |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
evaluate practices, policies, and conduct relative to the CFA Institute Code of Ethics and Standards of Professional Conduct;
explain how the practices, policies, and conduct do or do not violate the CFA Institute Code of Ethics and Standards of Professional Conduct.
CFA® 2025 Level II Curriculum, Volume 6, Module 45.