Hello, Relatively to standard III duties to clients and subsection a/ loyalty prudence and care. 1/Is it allowed for the portfolio manager to forward client brokerage to a certain broker in exchange of payment by this broker of portfolio manager’s firm overhead or research or information about tax-free investments that does not benefit the client? " In this example, the client is receiving best execution and price" 2/Should he disclose the situation to the client? 3/ Should the portfolio manager always report to the client goods and services paid with the client brokerage even if it benefits the client? Thanks for your help guys
1/Is it allowed for the portfolio manager to forward client brokerage to a certain broker in exchange of payment by this broker of portfolio manager’s firm overhead or research or information about tax-free investments that does not benefit the client? " Overhead may not be paid by soft dollars. Neither can can anything that does not benefit the client. In most cases soft dollars pays for research reports that benefit the client.
Honestly, when in doubt, disclose, disclose, DISCLOSE! There is no violation going on in the above given that the client is receiving best execution and price, but any arrangements should be disclosed.
- Client should benefit from the additional compensation. Not Necessarily, Since the client got the best execution & price. My understanding is that SOFT DOLLARS are meant to benefit clients, neither the analysts nor the brokerage. 2. Not necessarily as long as the analyst intends to benefit client. 3. Again, Not necessarily