I was wondering if anyone could help me with an end-of-chapter question from the Ethics material.
I’ve reproduced the question and answer below, but I am still puzzled how the answer is not (B). The CFA says (A).
My line of thinking is that if Carter is allowed to do this, he could just as easily churn the “soft dollar prohibited” accounts, generating commissions that the brokerage will use (albeit indirectly) to determine whether Carter will continue to receive research.
Isn’t this the exact definition of soft dollars – paying the brokerage commissions to receive (unpaid, but valuable) research in return?
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Previously posted here, but I don’t think it was satisfactorily covered.
Your company requires you to always take the cheapest flight within your schedule.
It also forbids you from choosing flights based on the points you’ll earn.
For your trip to Fargo, the cheapest/best flight happens to also be the one that’ll earn you the most points.
You would choose the flight that costs the least and best fits your schedule. Picking a worse or more expensive flight to avoid getting points wouldn’t make sense.