Disclosure of soft dollars

CFA Level III
#1

Quick one: according to cfa text, you must disclose the use of soft dollars that don´t benefit the client. ok. should you also disclose the use of soft dollars that DO benefit the client? (not in the context of the asset manager code of professional conduct, where disclosure of soft dollars is a MUST) thx

#2

i would say you always must disclose… but i thought they MUST benefit the client…

#3

they say that if the manager uses client brokerage to purchase service that don´t benefit the client, you should disclose I guess it can be fine, as long as you get best execution, etc but in “good situations” where the soft dollars do benefit the client, should we also disclose?

#4

i’d say yes… seond opinion anyone?

#5

I am perplexed. I was under the impression that you can not utilize soft dollars unless it directly benefits the client. ?

#6
  1. you can utilize soft dollars for other clients if the trade was a principle trade, but you need to get client permission to do so 2) if the trade is an agency trade YOU CANNOT use softdollars except for the benefit of the client. (As far as i recall)
#7

don´t blame me, is cfa wording… :slight_smile: page 50 I am with 3rd&long, you should disclose. by the way, i was checing schweser for level 2 last year (one single chapter on soft dollars), and they say that you can get soft dollars that don´t benefit the client if “on the long run they will benefit him” or no fiduciary regulation applies

#8

I remember being confused about it as well. Do you have to disclose soft dollars even if you get the best price/execution/lowest commissions for clients’ trades? I would think so, but I saw a question with such situation where not disclosing was not a violation.

#9

comp_sci_kid Wrote: ------------------------------------------------------- > 1) you can utilize soft dollars for other clients > if the trade was a principle trade, but you need > to get client permission to do so > 2) if the trade is an agency trade YOU CANNOT use > softdollars except for the benefit of the client. > > (As far as i recall) This sounds very familiar to me… actually remember this after reading your post from L1 days. Remind me again the difference between a Principle trade and an Agency trade?

#10

Agency = broker acts as the client’s agent and executes trades for him. Principle = broker / manager takes a position on behalf of the firm (with the firm’s capital). PJStyles Wrote: ------------------------------------------------------- > This sounds very familiar to me… actually > remember this after reading your post from L1 > days. Remind me again the difference between a > Principle trade and an Agency trade?

#11

do you think we need to know anything else regarding soft dollar standards?

#12

compscikid hit the nail on the head with his post on this one. Also, I’m under the impression that you DO NOT need to disclose soft dollar policy if it benefits the client and there are no conflicts of interest. Can anyone confirm/deny this?