Say you have a pension fund that has an investment committee. The committee directs you to use a broker which does not provide best execution, and provides soft dollar benefits to committee members that could impair their objectivity. You are told that the beneficiaries of the plan “know” of the arrangement and that they are not receiving best execution, but do not have any problem with it. You continue using the broker. Are you then in violation of the standards for knowingly participating in a violation of soft dollar standards? Or are you OK since you are acting under a directed brokerage agreement?
ahhhhhhh this question killed me i went with not a violation because the beneficiaries “knew” No idea though
I guess it’s OK because the beneficiary are informed and aware of the situation.
I said violation. I went back and forth on it several times.
i think they need to do more than “know”. need a much stronger action. curious as to whether the extravagant weekends/dinners (can’t remember exactly) would be a problem… my thought is if there’s true educational value, it’s often ok (although saw some Q’s inconsistent with this). anyway, to me “know” was the giveaway.
It’s not ok because, you need to get WRITTEN consent in order for this to be ok. The guy in this question was just aware that they were aware about it.
I had no clue on this one either. I put because of best execution because i thought that it said that the benefeciaries were aware of the directed trading relationship, but i don’t think it said that he had told them?
My thought was regardless of whether the committee knew, there is still an ethical responsibility to seek best execution and you must manage in the interest of the beneficiaries not the board. Any thoughts?
What’s the point of the standards if you can screw clients if they somewhat agree to it?
i think in both AMC and C&S it says that they SHOULD seek written consent - never sure if that means recommended or required but notification yes…
I put that it’s in violation. I know that for fair dealings disclosure of unfair practices does not alleviate you of your duties to comply. We need to hear from Mcleod on this one
bigdog Wrote: ------------------------------------------------------- > My thought was regardless of whether the committee > knew, there is still an ethical responsibility to > seek best execution and you must manage in the > interest of the beneficiaries not the board. Any > thoughts? in self-directed brokerage you can have less than best execution as long as clients know thats the case
Ah there he is way up there. Thank McLeod. I got it right but for the wrong reason
How are you screwing the client? It’s directed brokerage. He reported to them?
violation. fund manager owes fiduciary responsibilities to the pension beneficiaries and not the investment committee… pension fund beneficiaries were being taken for a ride by those who were supposed to look after them.
Besides, wasn’t the committee in charge of a foundation or something? If so, the manager needs to be worried about the ultimate beneficiaries, not the investment committee.
mark@dirtbags Wrote: ------------------------------------------------------- > How are you screwing the client? It’s directed > brokerage. He reported to them? it’s not the committee’s commissions, is it?? it’s the beneficiaries, i think. i think they need to do alot more than “know about it”
Dsylexic Wrote: ------------------------------------------------------- > violation. fund manager owes fiduciary > responsibilities to the pension beneficiaries and > not the investment committee… pension fund > beneficiaries were being taken for a ride by those > who were supposed to look after them. That makes sense.
There’s really multiple reasons why this is a violation: -not in the interest of plan beneficiaries -no written consent regarding the client directed brokerage agreement
but (and this is pure curiousity), the committee could have “approved” it??