Reading 4: Trade Allocation:

Fair Dealing and Disclosure

 Learning Outcome Statements
• LOSs Covered
• 4a, 4b
• LOSs Not Covered
• None
 Issues
• Firm did not prescribe any objective measures
• Firm allocated trades ad hoc
• Firm based compensation arrangements in favor of
performance-based fee accounts
• Firm used profitable equity trades to boost performance
of performance-based accounts
• Firm favored some clients
 Appropriate Actions
• Firms should obtain advance indications of client’s
interest for new issues
• Allocate new shares by client rather than by portfolio
manager
• Treat clients fairly