p. 148 A. When directed by a Fiduciary, the investment manager SHOULD receive written assurance from the Fiduciary that the client directed brokerage arrangement will solely benefit the client’s account * QUESTION * WHAT DOES SHOULD MEAN? DOES IT MEAN IT IS REQUIRED TO RECEIVE WRITTEN ASSURANCE? ----- C. The investment manager SHOULD request from its client in any Client Directed Brokerage Arrangement written instructions that: 1. restate the Investment Manager’s responsibility for seeking to obtain best execution * QUESTION * WHAT DOES SHOULD MEAN? DOES IT MEAN IT IS REQUIRED TO RECEIVE WRITTEN INSTRUCTIONS WRITTEN INSTRUCTIONS THAT RESTATE THE INVESTMENT MANAGER’S RESPONSIBILITY FOR SEEKING TO OBTAIN BEST EXECUTION?
WHAT DOES SHOULD MEAN? DOES IT MEAN IT IS REQUIRED TO RECEIVE WRITTEN ASSURANCE? This is to do with the case where a Fiduciary (think a trustee of a pension plan) directs the investment manager to enter a client-directed brokerage arrangement. In this case the RECOMMENDED procedure is for the investment manager to receive written assurance that the arrangement will benefit only the ultimate client, i.e. the beneficiaries of the pension plan and not the Fiduciary himself. WHAT DOES SHOULD MEAN? DOES IT MEAN IT IS REQUIRED TO RECEIVE WRITTEN INSTRUCTIONS WRITTEN INSTRUCTIONS THAT RESTATE THE INVESTMENT MANAGER’S RESPONSIBILITY FOR SEEKING TO OBTAIN BEST EXECUTION? It is only a recommended practice under a client-directed brokerage arrangement. The basic idea is that under this arrangement the investment manager is not exempted from the responsibility of seeking best execution within the constraints of the arrangement. The written restatement is to ensure that client is aware of this.