Ethics (CFA Level III)

Vol 1, Reading 5, Page 253 For Question 3, why is the correct answer ©, and not (A)? The question is: With regard to the IPO share allocation, are both NGM’s method of trade correction on 15 May and Locke’s demand for short term interest credit, respectively, consistent with the CFAI Standards of Professional Conduct? I understand why the demand for short term interst credit is consistent.

But why is NGM’s method of trade correction inconsistent? What was his method of trade correction? From my reading of the passage, it appeared to be adjusting the Fund’s account. If NGM adjusted the Fund’s account by crediting short term interest, then why is this wrong?

I’ve just finished Ethics 3 min ago and I did this question 5 ago :wink:

It’s inconsistent because Black has not credited the account for the short term interest.

Ethics cases are pretty hard, no? I success the single part questions (Pages 148 to 159) very well but some cases were really hard. What do you think?

Ethics and behavioral- both are touchy feely for me. Most difficult and you can not prepare for it either.

@yqb_cdg Thanks for your reply! I understand how the situation is inconsistent with the Standards if the Fund’s account had not been credited for short term interest.

However, the case says that the account was “adjusted”. What do you interpret to have been NGM’s method of trade correction (where does it say this in the case question), and why was this wrong?

I interpreted “adjusted” by “surplus stock was removed”

@yqb_cdg Thanks, that makes sense to me. Next topic now! :slight_smile: