Fairness

The exam tests III(B) with allocation and timing vignettes: a manager fills a block trade or oversubscribed IPO and parcels shares so favored or larger accounts get filled first, or emails a rating change to top-tier clients before the broad list. The “tell” is sequencing — the recommended cure is a documented, systematic allocation method (CFA Institute suggests pro-rata for partially filled or oversubscribed orders, with block trades getting the same price and commission), so personal/firm accounts never trade ahead of clients. Limiting who hears a recommendation is fine when the basis is suitability or known interest, not favored status; selectively timing delivery within a class is the violation.

The classic trap is the III(B) vs III(C) Suitability boundary: III(B) governs how you distribute a recommendation across clients, while III(C) asks whether it fits one client’s IPS — a recommendation can be perfectly suitable yet distributed unfairly. Don’t reach for Conflicts of Interest (Standard VI) either; disclosing differential service tiers is permitted, but disclosure cannot cure a patently unfair allocation. Hook: “Fair = same rules, same basis” — not same shares.