correction

问题如下：

Jason Locke, CFA, has recently been hired as the Chief Investment Officer of the Escarpment Regional Government Employees’ Pension Fund (the Fund). Currently, he is conducting evaluations of all external managers employed by the Fund to ensure that they are providing the highest possible returns for their mandates, while complying with all applicable laws and regulations.

Locke is evaluating the activity of Niagara Growth Managers (NGM), a local money manager allocated 10 percent of the Fund’s assets. He realizes that any reduction in the allocation to this local manager will be met with considerable political pressure. The investment policy statement (IPS) for NGM’s portion of the Fund’s assets states that NGM is to actively manage an equity portfolio of local small-cap, high-tech companies.

Upon his review of NGM’s activity, Locke is concerned about two items that he would like explained. At a meeting with NGM’s portfolio manager, Emma Black, CFA, Locke asks her to comment on each item:

Commodities Positions

Locke: "Over the last year, several large positions in commodities have been taken by the Fund’s portfolio. This is inconsistent with the IPS."

Black: "Commodities have significantly outperformed high-tech equities recently. I added commodities to larger clients’ portfolios on a temporary basis. Clients were not informed because the positions will be sold once market sentiment shifts. I have not managed commodities before, but I am getting good returns."

Locke: "I am uncomfortable with these investments in this portfolio."

IPO Share Allocation

Locke: "The Fund’s portfolio received 50,000 shares of an initial public offering (IPO) on 1 April. On 15 May, 30,000 shares were removed at the current market price."

Black: "There was a problem with NGM’s IPO allocation algorithm. Initially, you were over-allocated and when we discovered the error, your account was adjusted."

Locke: "Short-term interest should have been credited to the Fund for use of its cash to cover the trade. In any case, this was an IPO of a large international high-tech company. It was not an appropriate investment for the portfolio."

After the meeting, Locke is not satisfied with Black’s comments and decides that further action is required. He also decides that he will allow NGM to continue to manage Fund assets until he finishes his evaluation. This decision is based on the superior returns of the NGM-managed assets, the significant diversification this portfolio adds to the Fund, and also the political implications of firing the local money manager.

The next week, Locke calls Black and outlines several conditions that must be fulfilled for NGM to continue as a manager for the Fund. One of the conditions outlined relates to trade allocations.

Trade Allocation

Locke: "Provide written trade allocation procedures consistent with the CFA Institute Standards of Professional Conduct."

Black: "I will mail you a copy of our new procedures stating that trade allocations must be reviewed at the end of each month against clients’ IPS. It also says that interest will be credited to accounts that have been incorrectly allocated shares and debited from those accounts that should have received shares."

With his evaluation complete, Locke must now consider whether to retain NGM as one of the Fund’s asset managers.

3. With regard to the IPO share allocation, are both NGM’s method of trade correction on 15 May and Locke’s demand for a short-term interest credit, respectively, consistent with the CFA Institute Standards of Professional Conduct?

选项：

A.

Yes.

B.

No, only the method of trade correction is consistent.

C.

No, only the demand for a short-term interest credit is consistent.

解释：

C is correct.

Locke’s interest claim is legitimate since the Fund’s cash was employed to purchase equities that were later removed from the account. Therefore, the Fund is owed interest for the period in question.