CFA Practice Question

There are 291 practice questions for this study session.

CFA Practice Question

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?

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.
Correct Answer: I, II and III

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.
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