Complete Question:
An investment adviser has placed an order with the underwriter for 250,000 shares of XYZ stock, a new company that will be listed on NASDAQ. The adviser will allocate this purchase to its largest discretionary accounts. This action is a(n):
Group of answer choices
A. breach of fiduciary duty
B. front-running violation
C. fair and reasonable practice
D. insider trading violation
Answer:
breach of fiduciary duty.
Explanation:
In this scenario, an investment adviser has placed an order with the underwriter for 250,000 shares of XYZ stock, a new company that will be listed on NASDAQ. The adviser will allocate this purchase to its largest discretionary accounts. This action is a breach of fiduciary duty.
According to the Securities and Exchange Commission (SEC), if a registered investment adviser favours a client over another while allocating a block, it simply means that the registered investment adviser has violated his or her fiduciary duty to the other customers who were denied a piece of the block.
