Question #22
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: 9
Status: Correct
Correct Answer: B
Question
Scott Andrews, CFA, is a stockbroker selling an oversubscribed stock issue. Which of the following best describes Andrews' actions regarding this sale? Andrews:
Answer Choices:
A. can only offer this security to clients for which it is appropriate on a first come first serve basis
B. can offer this security on a prorated basis to all clients for which the security is appropriate
C. cannot offer an oversubscribed issue of stock to any clients
Explanation
Standard III(B), Fair Dealing, applies. When new issues or secondary offerings are available
or are being offered by the firm or if the firm is part of a selling syndicate, all clients for
whom the security is appropriate are to be offered a chance to take part in the issue. If the
issue is oversubscribed, then the issue is to be prorated to all subscribers.