Fair Dealing: Trade Allocation

AlexP Wrote:
——————————————————-
> I quickly searched the The Standards of Practice
> Book. I am not sure if this is the last edition.
>
>
> http://www.cfapubs.org/toc/ccb/2005/2005/3?cookieS
> et=1
>
> I did not see anywhere where a non fee client
> should be treated differently on this issue. It
> does not prove that tehy should be treated equally
> either. It is a little frustrating not been able
> to find the correct answer.
>
> Legacy perspective makes sense though, but if the
> issue is not oversubscribe, I am not sure if
> paying clients would be treated unfairly.
If nobody can find solid proof in the text that gives an answer either way on this one I might write the CFA to inquire about throwing the question out. I’m sure i’ll get far with that :)
 
The more I read the more uncertain I am about my answer, haha. The annoying thing is we will never know either if it is encountered again which is correct or not.
 
Regarding fairness and Schweser, it refers to the situation when providing additional services to high fee paying accounts, but of course after making sure others receive the information or have the necessary notice to act on a news, but this is a different situation and a bit tricky; it’s like with the hot dogs; if everyone paid for it and there is a shortage, it doesn’t make sense you give the hot dog for free to your friend, if there is plenty of them then he is welcomed…made some search but couldn’t find a clear answer to that situation… not good…
 
Alrighty: This is right from the CFA book (Page: 54)
The term “fairly” implies that the member or candidate must take care not to discriminate against any clients when disseminating investment recommendations or taking investment action.
It goes on to say…
In addition, members and candidates may provide more personal, specialized, or in-depth service to clients willing to pay for premium services through higher management fees or higher levels of brokerage. Members and candidates can differentiate their services to clients, but different levels of service must not disadvantage or negatively affect clients.
I read that as because the father is not paying fee he won’t get the same level of service as other clients, but he is must not not be discriminated against when taking investment action.
 
but the investment action also refers to “clients” which his father is not.
I honestly don’t remember the entirety of the question, if there are all the shares in the world and no one is getting shortchanged by giving his father the same execution I don’t see the harm, but if there were limited shares(in the block order I guess) if they would get better pricing giving out 60,40 to the paying clients than doing 50, 35, 15 including the dad I think legally and ethically that would be wrong.
I don’t know from the definition I was reading on investopedia it talked about paying clients and seemed to me that the dad in this particular instance shouldn’t get the same treatment but of course that changes if there are unlimited shares. The reason I feel like it matters because in a block order you only have say 300,000 shares at a certain price and execution, so you should give that 300,000 block to the paying clients then the dad may or may not be included in that block but if that block doesn’t fill the other paying clients orders you should not give any to the father. I don’t think it got that specific and I can’t remember so I don’t know.
 
Question came right out of Schweser and according to them the answer was should be treated similarly.
What did people put for the most important part of choosing a broker or close
Answers were similar to: Best execution, lowest fees, xxx?
 
I went for best ex as well but who knows. I thought that question really came out of left field.
I think we are all very anal though, looking at the questions on the test I would be shocked if <85% on this board did not pass.
 
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