Ethics: credit the interest back when trading error

CFA Level III
#1

Ethics: Say if you discovered an error in account A - bought some securities you are not supposed to buy for A; instead you should buy for B - you sell the security and credit the interest back to A? Say security also appreciate 1000; you sell the security and give the gain to B? How this should be handled? I can’t find anything in handbook.

#2

anybody?

#3

I know for sure A gets credited for interest. I think B gets the benefit of the appreciation, but I seem to remember that they would not be dinged for a loss. I’m not 100% on this though.

#4

i swear i saw a CFA exam on that where you just move the security and interest to A from B, but I can’t find it.

#5

Any losses you take. Any gains B gets (and gets to keep the interim interest from cash in their account). And A gets credited the interest they would’ve received from the cash.

#6

I think vanz is correct

#7

interest paid to A gains allocated to B in case of losses not sure I think the company covers them

#8

company definitly eats losses

#9

there was a fund manager eating trading mistake question. broker said they eat it if the fund manager committed to trading volumes (that was actually consistent with historical activity with broker), but answer said that was soft dollars. i.e. fund manager is using commission to benefit itself (i.e. they won’t have to pay)

#10

vanz is right. seems a bit common sense to me, what would you do!

#11

jeks Wrote: ------------------------------------------------------- > vanz is right. seems a bit common sense to me, > what would you do! i agree that it’s somewhat common sense. and the amount of money is tiny (not that that’s really in the ethics reading, but it’s common sense)…