土豆妮

Which of the following is one of the four requirements for meeting fiduciary obligations with regard to soft dollar arrangements? Items purchased with soft dollars must:

A) provide a benefit to the firm.

B) provide a benefit to the client.

C) provide at least 50% of their benefits to the client.

---

Items purchased with soft dollars must provide a benefit to the client.

土豆妮

Steve Bishop is a portfolio manager with Bradshaw Asset Management. He has received a request from the Gail Foundation, one of his clients, to review Bradshaw's soft dollar policy, since Bradshaw claims to comply with the CFA Institute Soft Dollar Standards. Bishop must be prepared to present the client with all of the following EXCEPT:

A) the aggregate percentage on Bradshaw's brokerage derived through client-directed brokerage.

B) the total amount of Gail's commissions generated through soft dollar arrangements.

C) the total amount of brokerage paid by Bradshaw to each broker.

---

The disclosure of the total amount of brokerage paid by Bradshaw is recommended but not required, and there is no mention of disclosure of brokerage paid to each broker.

土豆妮

Which of the following is NOT one of the basic fiduciary duties? To:

A) maintain knowledge of and comply with all applicable laws.

B) place their client’s interest before their own.

C) exercise prudent judgment.

---

CFA Institute members have a duty to maintain knowledge and to comply with all applicable laws, but this is Standard I(A), Knowledge of the Law, not a fiduciary duty.

土豆妮

Which of the following statements about soft dollars is TRUE?

A) Fiduciaries must disclose actual, but not potential, conflicts of interest.

B) Items purchased with soft dollars must provide a benefit to the client.

C) Items purchased with soft dollars must provide a benefit to the firm.

---

Items purchased with soft dollars must provide a benefit to the client. If this benefit is less than 100 percent to the client, soft dollars can only be used to purchase the item in proportion to the benefit derived by the client.

土豆妮

Carl Johnson, a large equity client of Madison Investment Advisors, directs Madison to pass along old copies of any research purchased with soft dollars generated by trades in his account to his friend Jacob Wisnewski. Madison receives about ten such reports per year, and, after these have been reviewed in the context of their relevance to Johnson’s account, they are forwarded on to Wisnewski. With regard to this procedure, which of the following statements is TRUE? The research:

A) provides a benefit to Johnson and may be released to Wisnewski with the permission of the source.

B) does provide a benefit to Johnson but may not be released to Wisnewski with or without the permission of the source.

C) does not provide a benefit to Johnson but may be released to Wisnewski with the permission of the source.

---

Since the research received is relevant to and is used for the benefit of Johnson, there is nothing inherently wrong with passing the reports to Wisnewski unless precluded from doing so by the provider of the research.

土豆妮

Springfield Investment Advisors uses soft dollars generated with mutual fund transactions to get software that is only useful for the management of client assets. Which of the following statements is TRUE? This is:

A) not permissible, since items purchased with soft dollars must provide a benefit to the firm.

B) not permissible, since items purchased with soft dollars must be tangible, and software is intangible

C) permissible, since items purchased with soft dollars must provide a benefit to the client.

---

This action is permissible, since the software is relevant and provides a benefit to the client.

土豆妮

Elaine Black, CFA has recently been hired as the Chief Investment Officer at a money management company that does not claim it is in compliance with CFA Institute Soft Dollar Standards. Her former company was in compliance. Which of the following statements concerning CFA Institute Soft Dollar Standards is TRUE? Black:

A) cannot use soft dollars to pay for research services except when the commissions originate from principle trades.

B) must ignore all provisions set forth in the CFA Institute Soft Dollar Standards except when they are consistent with the Standards of Professional Conduct.

C) must abide by the conditions set forth in the Standards of Professional Conduct concerning soft dollars and can chose to accept some of the CFA Institute Soft Dollar Standards.

---

Black must abide by the Standards of Professional Conduct, but can still follow any of the Soft Dollar Standards that she desires.

土豆妮

Liz Davis is a portfolio manager for a firm that claims it is in compliance with CFA Institute Soft Dollar Standards. In purchasing bonds for the account of the pension fund of Richards Company, no commissions were paid but there was a spread charged by the broker between the purchase and sale price of the bonds. The brokerage on the trade is not governed by any securities regulation. The specific brokerage from the trade:

A) cannot be used to benefit any other client.

B) can be used to benefit another client as long as Davis receives prior consent from Richards.

C) can be used to benefit another client as long as Richards benefits from other the client’s brokerage in the future.

---

Prior consent must be given in the case of a principal trade.

土豆妮

Rochelle Bell is the Chief Investment Officer at a money management company that claims it is in compliance with CFA Institute Soft Dollar Standards. Last year the company had $10 million of soft dollar funds accruing from commissions available but only spent $8 million on research services. This year Bell estimates that the company will have $11 million of soft dollar funds available. Bell analyzes the research services that the firm wishes to purchase and places them into four categories: fully available for soft dollars, mixed usage, not available for soft dollars, and cannot be determined. The total of soft dollars allocated to the first two groups is $7 million, and there are $500,000 of expenditures in the group for which she cannot determine whether they are suitable for soft dollar expenditures. Bell should:

A) allocate $500,000 of this year's soft dollars to this last group.

B) use the 50-50 rule and allocate $250,000 of soft dollars to this last group.

C) not allocate any of the soft dollars to this last group.

---

In cases when the manager cannot determine whether the expenditure qualifies for soft dollars, soft dollars cannot be used.

土豆妮

Marc Schultz manages an equity mutual fund, and he uses soft dollars generated on this account to obtain equity research to assist him in managing the portfolio. With regard to this action, which of the following statements is TRUE? This action is:

A) not permissible; Schultz is in violation of his fiduciary duties.

B) permissible; Schultz is not in violation of his fiduciary duties.

C) not permissible; Schultz is not in violation of his fiduciary duties.

---

Since the research is relevant to the client assets and is used for the benefit of the client, the action is permissible, and there is no violation.