Question #64
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: 27
Status: Correct
Correct Answer: B
Question
Which of the following statements regarding allocating trades is CORRECT? It is permissible under the Standards to allocate trades:
Answer Choices:
A. based upon any method the firm deems suitable so long as the allocation procedure has been disclosed to all clients
B. based upon compensation arrangements
C. on a pro-rata basis over all suitable accounts
Explanation
It is permissible to allocate trades on a pro-rata basis over all suitable accounts. It is not
permissible to base allocations upon compensation arrangements. Any method is not
necessarily suitable, and disclosure does not absolve the member from ensuring that the
allocation is necessarily fair.
(Module 42.5, LOS 42: III(B))