In which scenario is it acceptable to allocate orders to proprietary accounts?

Allocating orders to proprietary accounts is a sensitive issue in the investment management industry, as it raises potential conflicts of interest and fairness concerns among clients. The correct choice highlights that such allocations are permissible when they align with established appropriate procedures.

These procedures are designed to ensure that allocations are made fairly and transparently, taking into account the best interests of all clients, not just those of the adviser’s proprietary accounts. This often involves guidelines on how trades should be executed, how to prioritize orders, and how to disclose any potential conflicts that may arise.

By strictly adhering to appropriate procedures, investment advisers can manage and mitigate the risks associated with conflicts of interest, thereby fostering trust with their clients while still allowing for the management of proprietary accounts under controlled and defensible circumstances. This adherence is crucial for maintaining compliance with regulatory standards and promoting ethical practices within the advisory business.