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Ethics question - Soft Dollars

Afternoon All.

Have a query on an ethics question I’m hoping some can shed some light on…

(Extract from question):

When placing trades, O’Brien often uses the services of Junk Specialist Securities. The firm has the reputation for the best high-yield research on the Street, high trading commissions, and best execution. O’Brien sometimes “pays up” on trades to obtain research. He uses the research in managing all accounts under his purview. These trades are allocated equitably over all accounts.

Answer:

The practice of “paying up” for the research is:

A)
OK for the fund and OK for the private accounts.

B)
not OK for the fund and not OK for the private accounts.

C)
OK for the fund but not OK for the private accounts.

I answered B which was incorrect.  (incidentally, the previous paragraph states there is 1 fund and 14 large private clients).  

My rationale was that I thought soft dollars were meant to benefit the specific client who paid for it.  I understood the text to mean the benefit was spread across all clients and I thought you couldn’t do that….am I missing something or just being a bit simple?!

cheers!



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was the answer C?

Is this a Schweser or CFAI question?  Is it (A)?  If he’s using it for all accounts under his management then they should all pay for it equally.  But that’s assuming that his accounts are the same as the “all” accounts.