I was doing sample exam and got this question: Art Dodd, CFA, is a registered representative with Owens Securities. He is currently in dispute with one client, Madge Phillps,CFP, about a limit order for her IRA account that she feels was entered incorrectly, resulting in a loss ( in her opinion) of $500. Dodd has been allocated 1,000 shares of a new issue that is oversubscribed. He suggests to Phillpes that he will give her 250 shares of his allocation if she forgets about the supposed trade error. Further, he offers to buy her dinner at a very nice restaurant that serves an excellent salmon Kulebyaka, which he suggests they pair with a nice wine. Accoring to the standards of practice, Dodd has most likely violated: A. IV(B) Additinoal Compensation Arrangements only B.I(D) Misconduct and IV(A) Loyalty C.III(B) Fair Dealing only D.I(D) Misconduct only. I feel we should choose (D) as Dodd is trying to offer his allocation to cover up potential mistake of his which is a wrong thing to do. However, the answer is C. Can anybody explain? Thanks!
there was a thread about this in the morning today… because Dodd is offering shares in an oversubscribed IPO – it is Fair Dealing… that is violated.
It sort of sounded like a bribe to me, which I’d consider misconduct. But perhaps the rationale is that the dispute is not related to anything criminal or manipulative, nor has it even been decided that a bad trade happened, so the focus should be on him offering her a part of the oversubscription and not offering it to other clients. This would mean he is not treating all clients equally: fair dealing violation. I hate it when they phrase stuff to cast people in a very sketchy light so that you’ll think they’re up to something.
that is the unethics of the entire ethics exam… drives you nuts, and you never know if you nailed it…
answer is definitely fair dealing, because they offered the oversubscribed share. to make you guys feel better the actual questions on L1 arent EASY, but they are at least more clear than this. this is a pretty bad question.
thanks guys . this really helps a lot!