Use of dealing comission Flashcards
Are dealing commissions allowed? (Between investment manager and broker)
An investment manager is prohibited from executing customer orders through a broker for a commission, in return for receiving goods or services unless the goods or services are:
- Related to the execution of trades or constitute the provision of investment research and
- Will reasonably assist the investment manager in providing services to its customers
What is an inducement?
A fee, commission or non-monetary benefit paid to/ provided by a third party must be designed to enhance the quality of the relevant service to the client
What inducements are acceptable?
Gifts, hospitality and prizes (of a reasonable value)
Promotional assistance from a product provider
Generic product literature from a product provider
Seminars and conferences
Technical services and IT
Training
In terms of personal account dealing what must firms have arrangements to prevent employees from?
entering into a personal transaction that:
o Involves misuse or improper disclosure; or
o Conflicts with the firm’s duties to a customer
In terms of personal account dealing arrangements what must employees be aware of? & what must happen in reference to these?
o Employees must be aware of restrictions on personal transactions; and
o Firms must be notified promptly of any such personal transactions
In terms of personal account dealing rules - what conditions do they not apply to?
o Deals under a discretionary management service
o Deals in units/ shares of a collective undertaking
o Personal transactions in life policies
In terms of conflicts of interest what should firms take reasonable steps to do?
- Identify conflicts of interest
- Maintain organisation and administrative arrangements designed to prevent conflicts of interest (including a conflicts of interest policy)
- Disclose conflicts where there remains a risk of damage to clients’ interests
