Schweser Notes Study Session 1 Readings 1&2 Question 24

  1. Mary Herbst, CFA, a pension fund manager at GBH Investments, is reviewing some of FreeTime, Inc.’s pension fund activities over the past years. Which of the following actions related to FreeTime, Inc.’s pension fund is most likely to be a breach of her fiduciary duties? A. Paying higher-than-average brokerage fees to obtain research materials used in the management of the pension fund. B. T rading with selected brokers so that the brokers will recommend GBH’s managers to potential clients. C. Selectively choosing brokers for the quality of research provided for managing FreeTime’s pension. Right answer: 24. C Standard III(A), Loyalty, Prudence, and Care. Herbst is acting as a fiduciary for the pension plan beneficiaries. Choosing brokers based on quality of services provided is reasonable. She may pay higher-than-average brokerage fees so long as doing so benefits the pension beneficiaries, not other clients. Trading with selected brokers solely to gain referrals is not likely to be in the pension beneficiaries’ best interest since it does not take into account other important factors for selecting brokerage firms. Can anyone explain why C is right and not B??? Thank you very much

Again see last reply, heres the link to were these have been discussed, with no conclusion,1250321

Hey pedpenny, thanks for link.

Check errata

@ AMCC what is errata?

It is posted at Do you have legit books? If so, you have a login that allows you to check updates.