QUESTIONS 1 THROUGH 18 RELATE TO ETHICAL AND PROFESSIONAL STANDARDS.

3. Carla Scott, CFA, is a portfolio manager for a company that manages investment

accounts for wealthy individuals. Scott has no beneficial interest in any of the

fee-paying accounts she manages, including her uncle’s account. When shares in

initial public offerings (IPOs) become available, Scott first allocates shares to all

her other clients for whom the investment is appropriate; only if shares are still

available does she purchase shares in her uncle’s account, if the issue is

appropriate for him. Scott provides each of her clients with full disclosure of her

allocation procedures and has received each client’s verbal consent to her

allocation procedures. According to the Standards of Practice Handbook, does

Scott’s method of allocating oversubscribed IPOs violate any CFA Institute

Standards of Professional Conduct?

A. No.

B. Yes, because she has breached her duty to her uncle.

C. Yes, because she has not precleared and reported her Uncle’s transactions.

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