Ch 6 IA Practices

Question 1

Do BDs have to disclose conflicts of interest?

Answer 1

No. The only requirement is that the recommendation is suitable

Question 2

Uniform prudent investor act (UPIA):

Answer 2

• Used as a guide for securities that can be recommended based on modern portfolio theory. It considers what is suitable considering diversification, risk tolerance, etc
• No specific types of investments prohibited. Any investment could be appropriate, even risky one if the risk/reward profile is suitable

Question 3

Soft dollar arrangements:

Answer 3

• IA may pay higher commissions for a trade in return for soft dollars from a BD. -
• Hard dollars are cash where as soft dollars are research reports, analysis, seminars, software, etc.
• The logic is that these things benefit the client. IA cannot receive things like hardware, travel, entertainment, rent, etc.
• must disclosure on ADV part 2