Oversubscribed IPO for family?


I can’t seem to understand, How to deal with oversubcribed IPO to family(no living together, say fee paying parent) that’s are client? I thought you suppose to deal with them like any other client. But my coworker, argue that according to AMC it’s a different story when it’s oversubscribed IPO in CFA text book.

Reading 2, p. 132.

– family accounts that are client accounts should be treated like any other firm account and should neither be givens pecial treatment nor be disadvantaged because of the family relationship.

– if a member or candidate has a beneficial ownership in the account, however, the memer or candidate may be subject to preclearance or reporting requirements of the employer or applicable law.

It goes on to state that the firm should establish rules for dealing with these and disclose them to clients. and it recommends not participating in IPOs because it gives the appearance of taking away investment opportunities from clients.

Also, reading 2, page 73:

– …if the issue is oversubscribed, members and candidates should forgo any sales to themselves or immediate families in order to free up additional shares for clients. If the investment professional’s family-member accounts are managed similarly to the accounts of other clients in the firm, however, the family member accounts shouuld not be excluded from buying shares.

So I don’t see how your friend is right.

If the family account is fee paying and treated like other accounts, they should have the ability to be allocated the IPO just like any other client account. The AMC is pretty clear on this.