I was under the impression that bigger accounts receive more shares, why is the answer A. A implies that a 20K account would receive the same amount of shares as 500K account if it is suitable for it. What am I not seeing here? Allocation on a strict pro rata basis means each account for which the shares are suitable: A) shall receive m/n shares, where there are m shares available and n such accounts. B) and which has expressed an advance indication of interest, shall receive m/n shares, where there are m shares available and n such accounts. C) shall receive w*m shares, where w is a disportionate value for all such accounts and there are m shares available. D) and which has expressed an advance indication of interest, shall receive w*m shares, where w is the account’s proportional value of all such accounts and there are m shares available. Your answer: D was incorrect. The correct answer was A) shall receive m/n shares, where there are m shares available and n such accounts. Strict pro rata means that each suitable account should receive m/n shares, where there are m shares available and n suitable accounts.
bigger accts getting more shrs is a big fat violation my friend. keep it classy (i just had this on a quiz and think it should lock it down nicely for you): A firm has three accounts for which shares of an IPO are suitable. These three accounts have asset size of $2,500,000.00 (A), $3,500,000.00 (B), and $4,000,000.00 ©, and have given advance indications of interest for 2,000 shares, 1,000 shares, and 1,000 shares respectively. There are 1,000 shares available. All of the following allocations are acceptable EXCEPT: A) 333 shares to A, 333 shares to B, and 333 shares to C. B) 250 shares to A, 350 shares to B, and 400 shares to C. C) 500 shares to A, 250 shares to B, and 250 shares to C. D) A different allocation that is based upon a predefined formula that is inherently fair and has been disclosed to clients.
shouldnt the manager ask for an indication of interest though?
his example i think would assume you got a bunch of indications of interest- once you do, there are certain ways you can and can’t allocate shares. strict pro-rata vs the indications is acceptable (his example). pro-rata vs account size, not so much (the question above should be pretty easy now).
B is not acceptable in bannisja’s question. I have had Qbank questions where the answer is “has expressed interest shall receive blah blah” or like the answer to SanyaizSanDiego question. I don’t get it.
bannisja is B the ans?
MikeMilken Wrote: ------------------------------------------------------- > bannisja is B the ans? Come on Mike, what the hell do you know about ethics?
I know just about enough of it to get around it.
bannisja many thanx to you for pointing that out. Although I don’t really think that happens in real life, we will go with the standards… your example is understood
yeah, B is the answer.