Fanky Quattro, CFA and portfolio manager of You Can Trust Us (YCTU) mutual fund and individual portfolio management services recently received a call from one of the brokers covering his account. The broker had 25,000 shares of an initial public offering that was priced at $13 dollars a share and opened for trading at $30. The broker said to Fanky “I’m glad to get these to you, but we expect you to buy more shares in the aftermarket to support the stock. And we also strongly suggest that you take a hard look at our other investment banking deals if you want to continue getting allocations like this.” Based on the information above, Fanky decides to put the entire allocation into his largest three clients so that each one gets a 1% position. He decided to allocate the shares this way because the position would be too small to impact the mutual fund.

Questions:

Has Franky violated any CFA institute or other applicable finance ethics policies? Please elaborate.