Pulser Primorak is an investment manager who recently bid in an IPO on behalf of his clients and was allowed to buy 1,000 shares of the issue. What should
Primorak do?
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A. B. C. D.C
Standard IV (B.3) - Fair Dealing. Note that the AIMR code does not prohibit investments by portfolio managers in IPOs if they are deemed appropriate investments.
Based on the information provided, Pulser Primorak, an investment manager, was allowed to buy 1,000 shares of an initial public offering (IPO) on behalf of his clients. The question asks what Primorak should do in this situation. Let's analyze each answer choice to determine the appropriate course of action:
A. He should distribute the IPO shares amongst the client accounts over which he has discretionary investment powers on a pro rata basis.
This answer suggests that Primorak should allocate the IPO shares among the client accounts for which he has discretionary investment powers. Pro rata allocation means distributing the shares proportionally based on the size of each client's account. This answer assumes that Primorak has the authority to exercise discretion over the client accounts and that this method of allocation is fair and appropriate.
B. He should treat all his customers equally and fairly by distributing the IPO shares amongst all his client accounts on a pro rata basis.
This answer proposes that Primorak should allocate the IPO shares equally among all his client accounts, again using a pro rata basis. This implies that Primorak should not favor any specific client or prioritize certain accounts over others. Instead, he should ensure an equitable distribution of the shares.
C. He should distribute the IPO shares amongst all his client accounts for which the IPO is an appropriate investment on a pro rata basis.
This answer suggests that Primorak should allocate the IPO shares to all client accounts for which the IPO is deemed suitable. It assumes that Primorak has assessed the investment objectives, risk tolerance, and other relevant factors for each client and determined that participating in the IPO is appropriate for those accounts.
D. The question is based on a false premise. Primorak should not have bid on an IPO in the first place since this violates the AIMR code of Ethics.
This answer asserts that Primorak's participation in the IPO violates the AIMR (Association for Investment Management and Research) Code of Ethics, suggesting that he should not have bid on the IPO in the first place. However, without additional context or knowledge of the specific provisions of the AIMR Code of Ethics, it is unclear whether this statement is accurate.
In the absence of further information, the most appropriate answer seems to be option C. Primorak should allocate the IPO shares among all his client accounts for which the IPO is deemed an appropriate investment on a pro rata basis. This approach takes into consideration the suitability of the investment for each client and ensures fairness in the distribution. However, it's important to note that without more details about the specific circumstances and any applicable regulatory requirements or internal policies, it is challenging to provide a definitive answer.