So in mock2 one of the clients directed her soft dollars to be given to her alma mater’s computer lab. WTF. Can you direct soft dollars to be used outside of investment management? Can I have my broker send my soft dollars to my aunt peggy for her hospital bills? Someone please clear that up.
no. It’s property of the client and I don’t see how it’s in the client’s best interest to spend it on this.
But she was allowed to do that in the mock2 case (her alma mater, not her aunt peg)
What Q is that? I don’t have a soft dollar Q in Mock 2. Or do you mean Sample 2?
yea i dont remember that q in mock 2… i just took it.
Smarshy Wrote: ------------------------------------------------------- > But she was allowed to do that in the mock2 case > (her alma mater, not her aunt peg) No chance…
Sorry, it wasn’t mock2, it was book 7 2am question 6. Q: Is the use of client brokerage to make a contrinution to the Roswell academy a violation? Schweser’s answer: No, because it was spent at the specific direction of the client.
Burn that book
So is that answer wrong? Does the world make sense again? What is the specific rule, that it must be spent on investment mgmnt / research?
Smarshy Wrote: ------------------------------------------------------- > Sorry, it wasn’t mock2, it was book 7 2am question > 6. > > Q: Is the use of client brokerage to make a > contrinution to the Roswell academy a violation? > > Schweser’s answer: No, because it was spent at the > specific direction of the client. That’s fine. The soft dollars are property of the client. The client can do whatever he/she wants with them. There’s another problem though that you have a fidciary duty to select the best brokerage arrangement for the client’s investment returns. It’s hard to believe that it’s a place that is sending money to the clients alma mater.
I don’t have book 7, but I’m guessing the setting was the client directed his money manager to use XY Broker and there was some sort of kickback program (not really soft dollar in the sense that CFAI defines them…more like some “cash back” offerings with credit cards). The client is free to do what he/she wants with those rewards that have accrued.
That was a tricky question (what else is new) because in another set of facts they had the trustees of a pension plan direct the soft dollars somewhere. In that instance, it was not allowed because the beneficiaries of the plan did not receive any benefit from the directed soft dollars.
The broker is using the soft dollars to give their alma mater $. What was the broker getting back?
JoeyDVivre Wrote: ------------------------------------------------------- > Smarshy Wrote: > -------------------------------------------------- > ----- > > Sorry, it wasn’t mock2, it was book 7 2am > question > > 6. > > > > Q: Is the use of client brokerage to make a > > contrinution to the Roswell academy a > violation? > > > > Schweser’s answer: No, because it was spent at > the > > specific direction of the client. > > > That’s fine. The soft dollars are property of the > client. The client can do whatever he/she wants > with them. There’s another problem though that > you have a fidciary duty to select the best > brokerage arrangement for the client’s investment > returns. It’s hard to believe that it’s a place > that is sending money to the clients alma mater. Hey Joey… if the money manager is dealing w/ a trust or endowment or something and is told to funnel money to alma mater computer lab, doesn’t the MM have some duty to the beneficiaries to ensure this sort of activity is not blatant embezzlement?? I mean, the fiduciary duty is to the beneficiary, and I guess the trustee is the “voice” of the beneficiaries… but what is the duty of the adviser if he recognizes blatant failure in the trustee’s fiduciary duties???
akanska Wrote: ------------------------------------------------------- > JoeyDVivre Wrote: > -------------------------------------------------- > ----- > > Smarshy Wrote: > > > -------------------------------------------------- > > > ----- > > > Sorry, it wasn’t mock2, it was book 7 2am > > question > > > 6. > > > > > > Q: Is the use of client brokerage to make a > > > contrinution to the Roswell academy a > > violation? > > > > > > Schweser’s answer: No, because it was spent > at > > the > > > specific direction of the client. > > > > > > That’s fine. The soft dollars are property of > the > > client. The client can do whatever he/she > wants > > with them. There’s another problem though that > > you have a fidciary duty to select the best > > brokerage arrangement for the client’s > investment > > returns. It’s hard to believe that it’s a > place > > that is sending money to the clients alma > mater. > > Hey Joey… if the money manager is dealing w/ a > trust or endowment or something and is told to > funnel money to alma mater computer lab, doesn’t > the MM have some duty to the beneficiaries to > ensure this sort of activity is not blatant > embezzlement?? I mean, the fiduciary duty is to > the beneficiary, and I guess the trustee is the > “voice” of the beneficiaries… but what is the > duty of the adviser if he recognizes blatant > failure in the trustee’s fiduciary duties??? It’s even a broader question than that, I suppose, about what are the MM’s fiduciary duties to the beneficiaries of the trust if he is dealing with the trustee. I don’t really know the answer, but I would be really hesitant to move any money out of the trust particularly in some backdoor way like this.