What is the stance on fair allocation in underwriting and avoiding insider favoritism?

• A. Allocations may be made to insiders if they are long-standing clients.
• B. Allocations are to be determined by issuer preferences.
• C. Allocations should be fair, non-discriminatory and not favor insiders or related parties.
• D. Allocations should be based on the issuer's politics.

Answer: (C)

Fair allocation in underwriting means the process must be objective and non-discriminatory, avoiding any favoritism toward insiders or related parties. This protects market integrity and ensures all eligible investors have a fair chance to participate. Underwriters should apply neutral criteria—such as order priority, size, price, and pro rata allocation—so access isn’t influenced by who is an insider or connected to the issuer. Giving insiders or related parties preferred access undermines trust and can raise regulatory concerns. The other approaches violate this principle: allocating to insiders because they’re long-standing clients creates bias; leaving allocations to issuer preferences injects favoritism; basing on political considerations opens the door to improper influence. Therefore, allocations should be fair, non-discriminatory and not favor insiders or related parties.