Ethics...how do you explain this??

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WildViper

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Ok, this has to be the most confusing, if not non-sensical, rules in the Ethics.
I am slow and am still in Ethics part, so excuse me. I hope to catch up fast after that.
Anyways..reading in Standard III B - Fair Dealing it says:
We have to deal fairly with all clients. Some clients can pay for higher personal, specialized and in depth services. These premium services can be paid for through higher management fees or higher brokerage fees.
HOWEVER…now this is the catchy part:
They can only do so as long as other clients are not negatively affected nor are they disadvantaged in any way.
What ????
If a client is paying more for specialized and in depth services…that will put them automatically in a better position to make better investment judgements. And obviously that would be advantageous for these clients and no so for the ones that are not paying for it!!!
Can some explain the thinking here?
 
WildViper, I’m confident what they mean is that the basic level of service must remain in compliance with the Code and Standards, and not deteriorate and become substandard due to the delivery of premium services.
Also, if I remember correctly, all clients must be made aware of the existance of premium services and have an opportunity to pay for those services if they so choose. I don’t think premium services can be offered selectively to individual clients at the firm’s discretion.
Please correct me if I’m mistaken.
 
Yes. There are going to be questions around this. For example in case of IPOs all customers must get the same level of service - Higher paying customers must not be alloted higher quanitities…..
 
You both are right and I understand that..however, here is a question that comes up for me:
An analyst has prepared a research report on a security. That report is available to all clients. However the firm makes available the analyst’s commentary to premium clients.
The analyst’s commentary provides premium perceptive clients with a sense on how strong the opinion is of the analysts. They can make a better judgement.
Would this not be a violation of this rule? If so, why? Cause the client paid for this and others didn’t.
I would think this would not be and should not be a violation.
Btw, this was a question I just made up.
 
WildViper, not a bad example. I think as long as the research report conforms to the Standards, particularly V(A) and V(B (reprinted below), this situation sounds okay to me. If the research report has a reasonable basis and is thorough, an astute reader should be able to evaluate the strength of the arguments presented. The additional commentary available to premium service subscribers would just be a bit of hand-holding, which wouldn’t obstruct the basic service folks from going about their business reading the reports themselves and drawing their own conclusions.
V. INVESTMENT ANALYSIS, RECOMMENDATIONS,
AND ACTION
A. Diligence and Reasonable Basis. Members and Candidates
must:
1. Exercise diligence, independence, and thoroughness in analyzing
investments, making investment recommendations, and
taking investment actions.
2. Have a reasonable and adequate basis, supported by appropriate
research and investigation, for any investment analysis,
recommendation, or action.
B. Communication with Clients and Prospective Clients.
Members and Candidates must:
1. Disclose to clients and prospective clients the basic format
and general principles of the investment processes used to
analyze investments, select securities, and construct portfolios
and must promptly disclose any changes that might materially
affect those processes.
2. Use reasonable judgment in identifying which factors are
important to their investment analyses, recommendations, or
actions and include those factors in communications with
clients and prospective clients.
3. Distinguish between fact and opinion in the presentation of
investment analysis and recommendations.
 
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