When a firm seeks to allocate a disproportionate number of shares of a hot IPO to performance-based fee accounts this constitutes a violation of the Standard concerning:
A. Additional compensation arrangements
B. Priority of transactions
C. Fiduciary duty.
I figured it wasn’t A, it was either B or C. Turns out its C, but can justify in my head why it would be one or the other. Anyone able to provide clarity?
Because you aren’t looking out for the client’s best interests and making reasonable decisions as to what’s suitable for them. Instead, you are allocating a hot-IPO for the ostensible reason of generating quick gains and increasing performance-based fees for yourself.
Isn’t that kind of like priority of transactions, giving transactions priority for certain accounts? How do you view priority of transactions?
Priority of transactions would be making an investment transaction for yourself before the client or employer. In this example, it would have occured if you allocated the hot IPO to yourself first, before the client.
got it thanks.