And one more on ethics - short-term interest credited

CFA Level III Ethics
#1

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 the client’s 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 regard to Locke’s condition regarding trade allocation, does Black’s response violate the CFA Institute Standards of Professional Conduct with respect to allocation reviews and interest adjustments, respectively?

Reviews must be done PRIOR, that is clear, but what exactly is the issue with the interest? Is it because you used that credit from other accounts? Because that sort of short-term credit for their use of cash is actually allowed…

#2

Not sure how that would actually be allowed unless there is some sort of a specific agreement with the client. I would say that kind of agreement is probably more permissible with prime brokerage rather than a regular brokerage account. For the exam, I would assume it’s not unless specifically mentioned.

To answer your question, yes, you have the make the other account whole for the missed credit interest