It’s from first case in Sample 1 - Q1. I didn’t understand the answer: "Board’s desire for Fund to act as a buyer of last resort violates the principle of acting for the benefit of clients”. Could someone explain the meaning of “buyer of last resort” in that context and why it is a violation of AMC?
“Buyer of last resort” means that if nobody buys, come to use and we’ll buy it out. Just like Fed is lender of last resort means if you want to lend and no company is giving you money go to govt. In this context - Company tells it clients that if we can’t sell your private placement, we’ll buy it from you. So you don’t have to worry.
Boston has the definition. I believe the violation occurs because you buy it from one client, which is good for that client. But the rest of the clients are getting screwed because they are getting a bad investment that no other buyers wanted. Someone correct me if I am wrong, just my thought when i read the question.
Thanks, CFAdreams and cfaboston28! Now its more clear to me.