I remember vaguely reading a problem where the correct answer was for a manager to refuse to place a trade for a client if that trade deviates from his portfolio strategy. But I also remember that in another problem, if the client insists, you must place the trade after giving him due warning. When do you do each situation?
I think you have to place the trade --> as long as you disclose how it affects the portfolio and you should document it
PM has to refuse a trade if they know the client is attempting to trade on material nonpublic info. Otherwise unsolicited trade requests by client are accepted as long as they are made aware of a deviation from the portfolio/risk tolerance/etc.
Good caveat on the material nonpublic info part
There are numerous incidents where you can refuse a trade. For instance, if it’s a joint account and the trade would substantially negatively affect the other joint account holder, you can refuse it until you get the confirmation from the other party and give full disclosure. Same thing if the trustee wants you to buy/sell something but it’s against the interest of the beneficiaries, you can refuse the trade. Then consult compliance for further action to resolve the dispute. If the trust documents for the account say you can’t buy/sell/hold something, no matter who asks, you follow the document and let them get a court order to revise the docs if they really want it done.
I believe that if a client wants to make a trade that is way out of the guidelines of his IPS, the PM should refuse to do so. I dont remember exactly where I read this, but I remember reading in an Ethics answer explanation that this is put in place to prevent the PM from being tempted to start making trades outside the guidelines of the IPS.
I am just remembering back into instances when we have done this, and as I remember you can do it if its outside the ima, aslong as its documented