reading the answer in CFA book, doesn’t need to be written. “Manager should disclose to client that they might not be getting best execution” Than plan beneficiaries makes sense though.
mark@dirtbags Wrote: ------------------------------------------------------- > reading the answer in CFA book, doesn’t need to be > written. > > “Manager should disclose to client that they might > not be getting best execution” > > > Than plan beneficiaries makes sense though. sounds like you might be right… doesn’t the committee “represent” the plan beneficiaries? aren’t they speaking for them??
Just smells fishy and I didn’t think of it. I thought it was fine. Maybe you can argue that the brokerage is giving the pension other benefits but I doubt it.
just seems sleazy - I felt similarly that the IC was screwing the beneficiaries. Hoping that CFAI wouldn’t tacitly endorse this kind of look the other way behavior under the guise of “my client said it was OK”. Hoping.
If the beneficiaries don’t know about it, then it was not ok. But since they know about it, so I think it is ok.
so there are 2 answers for violations 1. not best execution 2. personal benefit. I choose not best excecution any ideas?
wuyuan17 Wrote: ------------------------------------------------------- > so there are 2 answers for violations > > 1. not best execution > 2. personal benefit. > > I choose not best excecution > > > any ideas? They are allowed to use a directed broker even if the broker does not provide best execution. So that is not a potential right answer. I believe it is between “not a violation” or “violation because of the benefits to committee members”.
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. Guys you are missing the big point . Dsylexic is right . the beneficiaries are plan memebers not the plan sponsor. the manager has a fiduciary duty to them
> > Guys you are missing the big point . Dsylexic is > right . the beneficiaries are plan memebers not > the plan sponsor. the manager has a fiduciary duty > to them not sure about this, but isn’t the key the word “know”? too weak??
but the beneficiaries did not know because they are the people that expect pensions, and in this case fund need to do whatever is good for them (best execution) not what the comitte tells him. I think
florinpop Wrote: ------------------------------------------------------- > but the beneficiaries did not know because they > are the people that expect pensions, and in this > case fund need to do whatever is good for them > (best execution) not what the comitte tells him. > I think i was thinking the investment committee acts for the beneficiaries. i don’t think you need 40,000 people agreeing. but you might need to notify 40,000 people with a note in an annual or quarterly.
Dslyexic is correct. It does not matter what the committee says as far as not wanting best execution. Even though they are representing the plan participants, the ultimate duty of a cfa is to a plan participant not the committee. Remember the ERISA rules. So the CFA must act in the interest of the beneficiaries or plan participants. It does not matter if the board agrees or not. If the CFA acts on these instructions he/she is not seeking best execution. This is the basis of a ton of fee litigation currently in the courts where participants are suing companies over excess fees. Now the self directed brokerage is a good point and I dont remember the specifics in this question if this is just brokerage or actually self directed brokerage. I dont think this is self directed brokerage as the CFA is executing orders based on the order of the plan so self directed brokerage does not matter. But I think this is getting pretty far into the weeds and over thinking the question. phew… I guess we will never know since we dont get these answered.
McLeod81 Wrote: ------------------------------------------------------- > 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. You don’t need written consent for conflicts of interest. Although I still think I got this wrong…(said it was fine)
i thought this was a violation for not getting best execution, investment committee is enjoying the perks of this broker so of course they will be ok with directing trades through them regardless of execution, plus it said earlier that the PM had to school the committee on how the investments should work, so i am thinking they are not savvy enough to comprehend that it is wrong not to provide best execution,