Are they going to ask “which of the following are required and which are recommended procedures” on the test? Cause I’m looking at the soft dollar standards right now, and the suggestion that “The Investment Manager should assure that, over time, all Clients receive the benefits of Research purchased with Client Brokerage” and that agency trades should eventually go to the benefit of the client, and that principal trades should go to the benefit of the client only unless given special permission by the client ARE ALL RECOMMENDED ONLY wtf. Will they ask us “Johnny must do which of the following?” and then give us choices A and B are reommended things and choice C is required? I don’t want to have to remember which are reciommended and which are required…
this sucks. Also in corp governance in CF, you need to know req vs reco
I was under the impression that all three were requires as in: 1. The PM is required to make sure that all Clients receive the benefits of Research purchased with Client Brokerage, but isn’t required to make sure that each clients benefits from the brokerage bought on each specific trade. I.e. you could buy research for other clients with the brokerage of a given client even if that particular client doesn’t get any benefit from the research provided with/for that particular trade (as long as in the LT he benefits equally from a the research bought with the brokerage of other clients). 2. Agency trades are identical to one. 3. Research bought with the brokerage of a principal trade must benefit the particular account for which the trade is placed, each and every time. However, a principal account cannot benefit from research bought with other agency accounts. The exception here is if the principal client gives written permission to share brokerage paid research with other types of accounts, in which case it is treated just like 1 or 2. otherwise the principal account is required to pay for only his own research with only his own brokerage. I think this a fair and true summary but if I missed something or am wrong please do correct.
I don’t doubt that adavydov7; but look at http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2004.n1.4005 and go to page 10 and see that those things are merely recommended. I’m only asking out of pure fastidiousness and perhaps neurosis whether we need to spend time memorizing which ones are recommended and which ones are required.
Good linky, and good refresher too. I guess none of that sh!t is actually “required” so long as the brokerage of a client benefits the client. I guess the rest of what we talk about is more of a “how” it benefits the clients and describes an equitable apportionment. Good catch, good point, good reference rellison.
But now I’m wondering if they are going to ask on the test: Is Douglas Holdhisnuts required or recommended to make sure that all soft dollar research benefit the client in the long run? I don’t have the time or energy to remember what’s recommended and what isn’t.
The answer to that one is he is required:) Just do your best to grasp these issues and I am sure that if you can do that you’ll do fine on the exam.
Thanks adavydov7. Also, it’s not required, it’s recommended, that’s my point. Read http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2004.n1.4005 again page 10 and look at the bottom left of the page where it says Recommended.
@rellison: Where are you reading that its recommended. I am reading this as required per the link you provided: pg.10: I. A. 2. c. using Client Brokerage to benefit Clients
II. Relationships with Clients Required A. The Investment Manager must disclose to the Client that it may engage in Soft Dollar Arrangements prior to engaging in such Arrangements involving that Client’s account. Recommended B. The Investment Manager should assure that, over time, all Clients receive the benefits of Research purchased with Client Brokerage. 1. Agency Trades. While it is permissible for the Investment Manager to use a Client’s Brokerage derived from Agency Trades to obtain Research that may not directly benefit that particular Client at that particular time…
Well those are seemingly contradictory statements on the part of the CFAI. I don’t think there is any question that it is required for client brokerage to benefit the client, however it is recommended that he be able to assure (i.e. some sort of monitoring/documentation system) that this is in fact the case (i.e. it is recommended that he be able to document and/or provide evidence that clients have received the benefits of client brokerage in the long run), because when you asked your question about Mr. Holdhisnuts it was phrased as “is the manager required to use to soft dollars to benefit clients in the LR,” had the question been phrased as “is the manager required to assure that the use of soft dollars to benefit clients in the LR” the answer would be no as this would only be a recommendation to the manager in light of the fact that it is asking whether he has to assure that soft dollars are used to benefit clients as opposed to asking if soft dollar are used for client benefit. Very convoluted, very touchy, and iffy. We should expect no less from this exam.
screw this. Just read CFAI and forget that link I sent you on the cfa website. Just read CFAI and memorize that. This isn’t worth fretting over.
lol agreed, i need to go workout to blow off all this steam.