Ethcis Q

Lets say you are an investment professional and you advise and execute customer orders, and you decide to do it through Broker X because Broker X gives you research that you use to improve your recommendations to clients. Do you have to disclose this arrangement to the clients? According to a Shweser Vol. 2 question, the answer is NO - because the routing ultimately benefits the client. That sounds kind of fishy though - shouldn’t it be disclosed because it IS possible for something that biases you (as the IP) to also happen to be beneficial to the client…

No. It doesn’t need to be discussed. The key with these types of questions is if the value of the research is greater than or equal to the difference between Broker X and Discount Broker Y. As long as it’s benefiting clients, you’re good. Now, if Broker X is giving you cheaper PERSONAL trades, then you must disclose it.

Billy is absolutely right. If you can argue that the value provided by Broker X is a better value than another broker, he is in the clear