Question #55 - 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: 23

Status: Correct

Correct Answer: A

Question

Which of the following trade allocation procedures is improper? Allocation:

Answer Choices:

A. based upon past participation in IPOs

B. on a strict pro rata basis over all suitable accounts

C. based upon a predetermined formula

Explanation

Participation in prior IPOs does not insure suitability for subsequent IPOs. Moreover, this method of allocation could result in a fairness problem, since larger accounts are more likely to have had a greater level of participation in past IPOs. (Module 42.5, LOS 42: III(B))

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