Standard III(A) cases: client identity, loyalty and brokerage

In short

• First question: who is the client? A plan's beneficiaries (not the sponsor), a fund's mandate (not each fund investor), the honest opinion of an expert witness or the investing public for an analyst.
• Loyalty is tested by who benefits. A decision taken to win business, protect a friendship or hit a commission target fails even if the security itself is fine.
• Client brokerage is the client's asset: it may buy research that helps the client at a reasonable cost, or follow the client's own direction. It may never carry the manager's overheads, perks or education.
• Seek best execution unless the client directs otherwise, and warn that directed brokerage may cost it. Rewarding a broker with other clients' flow needs best execution and disclosure to those accounts.
• Proxies are assets: vote them after thought, use cost-benefit analysis to pick the votes worth casting, and publish the policy. A vote cast to please management or the sponsor is a breach.
• The role changes the content of the duty, not the principle: execution-only and blended roles still owe loyalty, prudence and care, without becoming fiduciaries or suitability advisers.