QUESTIONS 1 THROUGH 18 RELATE TO ETHICAL AND PROFESSIONAL STANDARDS.

1.

Bailey Watson, CFA manages 25 emerging market pension funds. He recently had the

opportunity to buy 100,000 shares in a publicly listed company whose prospects are considered

“above industry norm” by most analysts. The company’s shares rarely trade because most

managers take a “buy and hold” strategy because of the company’s small free float. Before

placing the order with his dealer, Watson allocated the shares to be purchased according to the

weighted value of each of his clients’ portfolios. When it came time to execute the trades, the

dealer was only able to purchase 50,000 shares. To prevent violating Standard III (B) Fair

Dealing, it would be most appropriate for Watson to reallocate the 50,000 shares purchased by:

A. reducing each pension fund’s allocation proportionately.

B. distributing them equally amongst all the pension fund portfolios.

C. allocating randomly but giving funds left out priority on the next similar type trade.