I am looking for clarity regarding the below question. What is required from the portfolio manager when a trade has been executed incorrectly. I understand that you would credit the interest but what do you do with the over-allocation of shares e.g. 30000 shares in the case below?
Reference to where this is cover in the material will also be appreciated. Thanks
With regard to the IPO share allocation, are both NGM’s method of trade correction on 15 May and Locke’s demand for a short-term interest credit, respectively, consistent with the CFA Institute Standards of Professional Conduct?
- No, only the method of trade correction is consistent.
- No, only the demand for a short-term interest credit is consistent.
C is correct. Locke’s interest claim is legitimate since the Fund’s cash was employed to purchase equities that were later removed from the account. Therefore, the Fund is owed interest for the period in question.