From time to time, PIA receives initial public offering (IPO) allocations from FTI. Danko allocates these IPOs to those discretionary accounts that normally participate in IPOs. If the IPO is oversubscribed, he excludes his wife’s discretionary non-fee-paying account so that he is not accused of bias when allocating the oversubscribed IPOs.
Q. Does Danko violate the CFA Institute Standards when he allocates oversubscribed IPO issues?
- No
- Yes, because he should allocate the oversubscribed IPOs across all discretionary accounts
- Yes, because he should treat his wife’s account the same as other discretionary accounts and include it in the oversubscribed IPO allocations
Answer as per Institute-
A is correct. When an issue is oversubscribed, allocations cannot be made to accounts where members and candidates have beneficial interest; client orders must be filled first.
Doubt- Why not Option C ?
I think it was answered earlier. Please check.