bmaggie

All of the following are required by fiduciaries under Standard III(A), Loyalty, Prudence, and Care, EXCEPT:

A) act solely in the interest of the ultimate beneficiaries.

B) place the client’s interest before the employer’s interest.

C) support the sponsor's management during proxy fights.

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Members are required to act in the interest of their clients. In voting proxies, the client’s interest must prevail over management’s interest.

bmaggie

Tony Calaveccio, CFA, is the manager of the TrustCo Small Cap Venture Fund in Toronto. He places trades for the fund with River City Brokerage. River City provides Calaveccio with soft dollars to purchase research. River City also deals in municipal bonds, some of which Calaveccio holds in his personal portfolio. He periodically uses the soft dollars to request research reports on various small cap stocks and also on the status of the municipal bond market and issues that he holds. These actions are:

A) not in violation of the Code and Standards.

B) in violation of his fiduciary duties regarding the municipal bond research but not so regarding the research on the small cap issues.

C) in violation of his fiduciary duties regarding both the small cap research and the municipal bond research.

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The issue at hand is the member's fiduciary responsibilities in handling "soft dollars" which are technically the property of the client. Standard III(A), Loyalty, Prudence, and Care, delineates the member's fiduciary responsibilities with regards to soft dollars. Since municipal bond research is clearly not relevant to the Small Cap Fund holders, he is clearly using the soft dollars to obtain research for his personal benefit and is in violation of the Standard.

bmaggie

According to Standard III(A) Loyalty, Prudence and Care, brokerage is an asset of the:

A) managing firm.

B) brokerage firm conducting the trades.

C) client.

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Brokerage is an asset of the client.

bmaggie

Bertha Mader, CFA, received proxy material related to a hostile takeover attempt of Danube Industries by Balnet Company. She holds shares of Danube in most of her client accounts. Mader has a high opinion of Danube’s management because they have run the company successfully and have always responded directly and honestly to her inquiries. She is not acquainted with Balnet’s management team but knows they have a reputation for improving the bottom line at the companies they acquire, partly because they tend to replace upper management at their targets and assume their functions. Balnet's offer is 60% higher than the price of Danube shares before the announcement. Danube’s management has contacted Mader and requested that she vote the shares she controls against the takeover because the management is concerned for their jobs and for the welfare of the company. To comply with the Code and Standards, Mader should:

A) vote for the takeover if she can get assurance that Danube's management team will remain in place.

B) delegate her proxy vote to another member of her firm due to the conflict of interest created when she was contacted by management.

C) vote for the takeover if it is in the best interest of Danube's shareholders, regardless of the consequences to current management.

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Standard III(A), Loyalty, Prudence, and Care, requires that members act for the benefit of their clients. Mader’s duty is to her clients, who are shareholders of Danube. She has no duty to Danube’s management, nor to the company itself, and must vote the shares accordingly.