AlexP Wrote: ------------------------------------------------------- > I quickly searched the The Standards of Practice > Book. I am not sure if this is the last edition. > > > http://www.cfapubs.org/toc/ccb/2005/2005/3?cookieS > et=1 > > I did not see anywhere where a non fee client > should be treated differently on this issue. It > does not prove that tehy should be treated equally > either. It is a little frustrating not been able > to find the correct answer. > > Legacy perspective makes sense though, but if the > issue is not oversubscribe, I am not sure if > paying clients would be treated unfairly. If nobody can find solid proof in the text that gives an answer either way on this one I might write the CFA to inquire about throwing the question out. I’m sure i’ll get far with that 
The more I read the more uncertain I am about my answer, haha. The annoying thing is we will never know either if it is encountered again which is correct or not.
Regarding fairness and Schweser, it refers to the situation when providing additional services to high fee paying accounts, but of course after making sure others receive the information or have the necessary notice to act on a news, but this is a different situation and a bit tricky; it’s like with the hot dogs; if everyone paid for it and there is a shortage, it doesn’t make sense you give the hot dog for free to your friend, if there is plenty of them then he is welcomed…made some search but couldn’t find a clear answer to that situation… not good…
i’d like a free hottog
Alrighty: This is right from the CFA book (Page: 54) The term “fairly” implies that the member or candidate must take care not to discriminate against any clients when disseminating investment recommendations or taking investment action. It goes on to say… In addition, members and candidates may provide more personal, specialized, or in-depth service to clients willing to pay for premium services through higher management fees or higher levels of brokerage. Members and candidates can differentiate their services to clients, but different levels of service must not disadvantage or negatively affect clients. I read that as because the father is not paying fee he won’t get the same level of service as other clients, but he is must not not be discriminated against when taking investment action.
Again it is not explicit, it’s very subjective…
but the investment action also refers to “clients” which his father is not. I honestly don’t remember the entirety of the question, if there are all the shares in the world and no one is getting shortchanged by giving his father the same execution I don’t see the harm, but if there were limited shares(in the block order I guess) if they would get better pricing giving out 60,40 to the paying clients than doing 50, 35, 15 including the dad I think legally and ethically that would be wrong. I don’t know from the definition I was reading on investopedia it talked about paying clients and seemed to me that the dad in this particular instance shouldn’t get the same treatment but of course that changes if there are unlimited shares. The reason I feel like it matters because in a block order you only have say 300,000 shares at a certain price and execution, so you should give that 300,000 block to the paying clients then the dad may or may not be included in that block but if that block doesn’t fill the other paying clients orders you should not give any to the father. I don’t think it got that specific and I can’t remember so I don’t know.
Question came right out of Schweser and according to them the answer was should be treated similarly. What did people put for the most important part of choosing a broker or close Answers were similar to: Best execution, lowest fees, xxx?
i put best execution…
I went for best ex as well but who knows. I thought that question really came out of left field. I think we are all very anal though, looking at the questions on the test I would be shocked if <85% on this board did not pass.
From CFA website :- ""Broker Selection Position: It is the investment manager’s responsibility to select brokers that can best execute securities transactions in a manner that adds value to its client’s portfolio. Rationale: Participating in arrangements that focus on factors other than the ability to achieve best execution ultimately violates the manager’s basic fiduciary duties to act in the client’s best interests. Investment managers’ selection of broker-dealers to execute trades should focus solely on the ability of that broker-dealer to achieve best execution. Where stated: Letter to SEC on Use of Brokerage Commissions to Finance Distribution 9 August 2004 “” http://www.cfainstitute.org/centre/topics/im/official/bestexecution_fairdealing.html I did best execution as well. happy
Best execution sounds to be correct
cool… i’ve been trying to think of other questions to bring up but cant remember any…
best execution is correct it was on Dec 08 too I believe. If you can produce that question from schweser and the correct answer they give I’d like to see it on the fair dealing question.
With regard to the fair dealing isn’t the determining factor whether his father’s account is considered as a “benficial account” or just a family account. If it is beneficial then it must be treated similar to a person account but if it is considered a family account then it is treated like all other customers. Candidates and Charterholders are allowed to perform services for free but they must perform an in-depth analysis (ie. IPS etc.) of the situation prior to giving any investment advice or performing services.
If the portfolio manager has a beneficial interest in the account then all shares must be allocated to the PM’s clients and then any shares left over must to the firm then the PM himself/the beneficial acct.
My theory here is that you deal fair with a client regardless of whether they are high fee paying, low fee paying or no fee paying. It’s like this: Would the air hostess, who happens to be your daughter, not serve you a meal in the same orderly fashion if she knew you got the ticket free (on your miles)? Will she serve you food after she serves everybody just because she happens to be your daughter and happens to know you got a free tix? The point is father is right in seeking fair treatment once he assumes a client status regardless of whether he is paying fee or not. Fee is a separate matter, dealing is a separate matter. IMO of course.
Does anyone remember the actual wording of the question? All I remember is the part saying that the relative does “not pay for investment management services”. Meaning they don’t pay to have their account managed at the firm in my opinion. From here I also think it was talking about a block trade of shares and not an IPO but in my opinion a block of shares is still a limited amount and if the block is not enough or is enough for all the accounts that would determine the answer. I also don’t recall the exact wording of the answers either.
There was no mention of beneficial account.