CFA Level 1: Member's Use of Clients' Brokerage Commissions

All Statements True About Member's Use of Clients' Brokerage Commissions

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Question

All of the following statements about a member's use of clients' brokerage commissions are true except

Answers

A. client brokerage commissions may be directed to pay for the investment manager's operating expenses.

B. client brokerage commissions should be commensurate with the value of the brokerage and research services received.

C. client brokerage commissions may be used by the member to pay for securities research used in managing the client's portfolio.

D. client brokerage commissions should be used by the member to ensure that fairness to the client is maintained.

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Explanations

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A. B. C. D.

This question deals with Standard IV (B.1), Fiduciary Duties and the specific topic of soft dollars. All the answers deal with the use of client brokerage commissions and the criteria for their use - (1) fairness to the client and (2) commensurate with the value of the services provided. The only statement that is not true is that client brokerage commissions may not be directed to pay the investment manager's operating expenses.

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