Trade Allocations Enforcement | Salvatore Faia Insights on Barron’s
VIGILANT INSIGHTS
Introduction
After recent charges against a Fund Manager related to Trade Allocations involving an alleged $600 Million cherry-picking scheme, Portfolio Managers are reviewing their policies and procedures to be sure they are meeting their Fiduciary Duty.
Vigilant’s President & CEO, Salvatore Faia, JD, CPA, CFE, provided his insights on Barron’s regarding this important compliance topic of Trade Allocation Processes that is expected to be under a regulatory microscope.
Salvatore Faia Insights
An important tool for Portfolio Managers is Trade Order Management Systems (OMS). They help managers track their orders when buying or selling Equities. Salvatore discusses how this software is best used for Equities but can cause difficulties when used for Fixed Income and Derivatives Trading. Calculations can be easily made automatically for Equities, but Fixed Income and Derivates typically require a more manual calculation.
Salvatore emphasizes that Firms must have Trade Allocation Procedures that provide proportional and fair allocations to their clients in order to meet their fiduciary obligations.
With Fiduciary Duty being an Exam Priority for the SEC in 2025, Salvatore warns that the SEC is looking for Preferential Treatment of clients by Advisers.
With a new Presidential Administration in 2025, Salvatore does not anticipate a relaxing of the scrutiny surrounding Fiduciary Duty. Public protection will likely be the main consideration, with focus remaining on trade rotation and trade allocations.
Vigilant’s Conclusion
It is vital that Firms have the proper policies and procedures in place to meet their obligations to Fiduciary Duty. It is also important that these policies and procedures are properly implemented, with controls in place at all levels of the organization to be sure they are compliant.
As we head into 2025, Firms should review the 2025 SEC Exam Priorities and evaluate the effectiveness of their own programs proactively.
Vigilant provides a thorough, tailored, and customized review of Compliance Reviews as well as Mock SEC Exam Services for this exact purpose; it is better for us to find insufficiencies before the SEC arrives for an Examination.