Question #20 - Reading 42.3 Standards of Professional Conduct Guidance for Standards III

Reading: Reading 42.3 Standards of Professional Conduct Guidance for Standards III

PDF File: Reading 42.3 Standards of Professional Conduct Guidance for Standards III.pdf

Page: 8

Status: Correct

Correct Answer: B

Question

Which of the following statements is least accurate? It is permissible under the Standards to allocate trades:

Answer Choices:

A. on a pro rata basis over all suitable accounts on the basis of an advance indication of interest and indicated order size

B. on a pro rata basis over all accounts

C. on a pro rata basis over all suitable accounts based upon account value

Explanation

Allocating trades on a pro rata basis, pro rata based upon order size (when there are too few shares to fill all orders, e.g., filling 2/3 of all orders actually submitted), or pro rata based upon an advance indication of interest are all permissible. However, accounts must be checked for suitability. (Module 42.5, LOS 42: III(B))

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