Allocation Day at the Bookrunner

Treat each on its own facts and resist the idea that the 6pm deadline changes any of the analysis.

(a) The bank's own fund management affiliate - 15% of the institutional tranche. Not prohibited per se, but this is the most conflicted request on the desk: the bookrunner controls allocation and its affiliate benefits from it, which is a direct conflict between the bank's advisory role and its asset management role. 15% of a 25x oversubscribed institutional book is an unusually large share for any single investor and will not survive scrutiny unless it survives a genuine, independent process. It should go to the conflicts committee with a written submission: the affiliate's investment rationale, its normal order size relative to its fund, what it received in comparable deals, and the issuer's consent. It should be allocated on the same criteria as any other investor. The default in a properly governed process is not 15%.

(b) The commission-heavy client - the "remember this at the next mandate" request. Refuse the quid pro quo outright. Allocations are not consideration for future business; that is a bribe with a commission structure. The client may still receive an allocation on the merits - order size, price sensitivity, quality of the book, history of holding - but the allocation decision must be recorded as independent of the hint, and the hint itself documented and reported. There is also a soft-dollar risk: routing extra brokerage to the bank in return for IPO shares is the kind of reciprocity that conduct regimes specifically target.

(c) The finance director's sibling's vehicle. This is a connected person. It requires full disclosure to the issuer and the issuer's sponsor or advisers, and the issuer's own board should approve. The bigger problem is the retail tranche: placing connected shares into a 12% retail offer distorts the allocation and creates a fairness issue for the retail investors it displaces. The correct answer is to refuse the retail route and, if the bank facilitates at all, do it as an ordinary institutional bid with full written disclosure and issuer approval, subject to the listing rules on connected persons and any lock-up.

The overarching rule: no allocation above policy without documented, independent approval. If the conflicts committee chair is travelling, convene the committee's delegate - not the deal team.

Handle it in three layers: what you do in the room, what you record, and what you fix.

In the room. Do not accept, do not appear to accept, and do not leave the impression that the offer will be considered. State plainly that allocation is determined by the bookbuilding process and cannot be linked to future business. If the client pushes, end the discussion. Do not negotiate, do not say "I'll see what I can do" - that sentence will be quoted later.

On the record. Document the conversation contemporaneously: date, participants, what was said. Escalate to compliance and to the conflicts committee. This is not an overreaction: an offer of business in exchange for an allocation exposes both sides. The client may be committing a bribery-adjacent act, and the bank's employee is now in a position where any subsequent allocation looks like a pay-off. The escalation protects the client relationship as much as the bank.

The allocation decision itself. The client's order should be assessed on the same criteria as everyone else's, and the file must show that the questionable conversation played no part. If the client is a strong long-term holder, it may legitimately get a good allocation - but the reasoning must be visible and unrelated to the hint.

The institutional fix. Review whether the allocation policy addresses the following: how allocation criteria are documented and disclosed to the issuer; who reviews allocations to connected persons and major commission contributors; whether the bank's commission data is visible to the allocation committee at all (ideally it is not, since the committee should not know who pays the most); and whether the sales team's incentives reward allocation size. If allocation has become a commercial lever in the sales culture, the conversation above is a symptom, not an isolated event.

Finally, decide the reporting question: whether the offer must be notified internally as a gifts and hospitality or anti-bribery matter, and whether the client relationship needs enhanced monitoring.

"A certain winner in a defensive sector" fails on both limbs.

• "Certain winner" is a prediction of investment performance presented as fact. It is misleading, it is unqualified, it cannot be substantiated, and it will be read by retail investors as reassurance. Offer documents and marketing materials must be fair, balanced and not misleading, and must contain risk warnings with prominence comparable to the potential benefits. No responsible issuer or bookrunner should let this go to print.
• "Defensive sector" may be arguable as a description, but paired with "certain winner" it is doing the work of a guarantee.

Remedial steps, in order: withdraw or correct the materials before further distribution; quantify how widely they have been circulated; notify the issuer and its advisers; consider whether the issuer's board or sponsor needs to approve corrected wording; and document the correction. If materials have already gone to retail investors, a corrective communication is likely required. This is a pre-listing issue with a pre-listing deadline, and the 6pm allocation pressure must not delay it.

Follow-on obligations after listing:

• Stabilisation. If the bookrunner acts as stabilising manager, the regime is narrow: permitted action, price limits, a defined window, full disclosure and record-keeping. Any buying support must be within those rules - not open-ended price support because the stock is weak. The marketing language makes it more likely the bank will feel pressure to stabilise, which is exactly why the language must be corrected.
• Allocation records and disclosures. Retain the full allocation rationale, the conflicts committee minutes, connected-person disclosures and issuer consents for the statutory retention period, and be ready to produce them on request.
• Research. Post-listing coverage must be independently produced and free of dealing-team direction; quiet-period restrictions may apply.
• Lock-ups and connected holdings. Track the lock-up and disclosure obligations applicable to the finance director's family holding, and ensure the retail issue was not a route around them.
• Client expectations. The clients who were told it was a "certain winner" will complain if it falls. The bank should be able to show that the corrected documentation and the actual allocation process were sound.