Two ethics concepts written, exception, concepts, ethics, refuse

chetan86

1. If a client’s IPS says to buy fixed income only, and he hears about an exciting new stock, can you buy it for him if he tells you and gives you written constent to make this exception and to buy it, or do you have to refuse?
Consider this sentence from CFAI Volume 1 page 60:
“In cases of unsolicited trade requests that a member or candidate knows are unsuitable for the client, the member or candidate should refrain from making the trade or seek an affirmative statement from the client that suitability is not a consideration.”
2. Are these two statements true?
a) For client directed brokerage, you must try your best to seek best execution (and ask the client to give you a signed paper affirming this) but if you cannot get it, you can still make the trade.
b) If you cannot get best execution, to make the client directed brokerage trade you don’t have to seek consent or disclosure since that’s already been taken care of at the start of the relationship when you told the client you would try your best but couldn’t guarantee anything.

d2rockstar

Just some thoughts, don’t know if its right or not.
1. seems like its ok to make the trade, its unsolicited and he gives you permission.
2a. yes
2b.False, the text seems to stress the mangers need to always remind clients of their duty to seek best execution. The scenario makes it seem as if a lot of time has passed.

segalm

1. take the order and take the written statement. The IPS is a dynamic policy, not set in stone and is for the client’s benefit. Unless the account is some kind of trust account mandating a certain style.
2.
A) False, don’t think you need written statement, trying is good enough
B) False, if you know you can’t do it, then you need to disclose.
2 is confusing.

malbec

2a is more of a confirmation; I’m almost positive this is true. In the vignette after the Soft Dollar text in CFAI books, the client wants to use some minority brokers to support the community. The PM says well I can’t guarantee you best execution but I will try and you need to give me a signed statement saying I have a duty to do this.
2b I’m unsure about. I know you don’t always have to get best execution although you should seek it, but I’m unsure if you have to disclose it each team as you do for say non-ERISA principal trades.

giorgio10

looks at page 148 in cfai text.
I think most of the bullets would be correct if it was option listed

onelife1

thats exactly where i’m lookin man. it was after reading this that i came up with my points above.
i think there is lots of emphasis on restating your commitment to the client because you dont always get the best execution. think about it, in client directed brokerage you are instructed with what brokers to deal with, so your hands are tied as to seeking best execution.

bcp901

The 2a Soft Dollar example sounds diff from the 2a Original.
2a SD is saying: the client wants you to use a broker you normally don’t use, so you can’t guarantee best execution for the client if you follow her order. You need to get a written statement from the client so the client knows you are suppose to give her best execution but you may not be able to b/c of her instructions which created material change. Makes sense.
2a O sounds like it depends on the time line of this client relationship. If it’s a new client, you need a written statement for disclosure and shouldn’t trade for the account without it to meet SD standards. {if I’m wrong tell me} But if it’s an old client, then you done one before, why would you have to get another letter? Doesn’t make sense so I think it’s false in that case. It doesn’t say you are due for another annual disclosure either.
And this is why ethics is such a pain. Hope they give lots of info so you can make a better judgment call.

Dapper425

justinkc Wrote:
——————————————————-
Just some thoughts, don’t know if its right or
not.

1. seems like its ok to make the trade, its
unsolicited and he gives you permission.

2a. yes

2b.False, the text seems to stress the mangers
need to always remind clients of their duty to
seek best execution. The scenario makes it seem
as if a lot of time has passed.
I agree with this guy.