This relates to the ethics question 6, on 2012 CFAI PM Mock
“One week prior to the IPO, Sahara’s Board of Directors approves and implements an Employee Share Option Plan (ESOP). Existing staff members are allocated 10% of the upcoming IPO at a 25% discount to the IPO price. Omar acquires his allocation with the intention of selling his shares at a profit after trading commences. The details of the ESOP are highlighted in the IPO prospectus”
Does Omar’s participation in the ESOP most likely violate any of the Standards of Professional Conduct? A. No B. Yes, with regard to “Priority of Transactions” C. Yes, with regard to “Conflicts of Stock Ownership” I picked B, but they say that the answer is A, with the explanation being: “A is correct because by participating in the ESOP program, Omar does not violate any standards because the ESOP program is fully disclosed in the IPO prospectus. When he sells his allocation, he will need to ensure he gives clients and the company priority in order to avoid any standards violation.” Although thier answer required a lot of guesswork as to what Omar would or wouldn’t do after the IPO is issued, I still don’t underand how it is fair to clients when the purchase he made for himself was at a discount while cients have to pay the full price. Can someone provide their interpretation for this question?