Answer Happy

Institutional Investments is a fund management firm that provides investment advice as well as investment management to large client accounts. I.I.'s senior portfolio manager, Richard Fineman's cousin, Alberto Onestone, runs a small brokerage firm. Fineman has directed all of his junior portfolio managers to execute their trades with Alberto. Alberto's fees are higher than those available from discount brokers but Alberto provides Fineman and his managers a wealth of investment tips that he hears on the street. This helps Fineman in producing a successful investment newsletter. This helps enhance I.I.'s reputation, attracting new clients and allowing lower fees on all the accounts. Since the client accounts benefit from this arrangement, Fineman's managers do not think the practice is unethical. The relationship between Fineman and Onestone is not explicitly disclosed to the clients. You are currently interviewing with them for the position of a portfolio analyst. As a CFA Level I candidate, they portray the above situation as a hypothetical case and ask you if there are any violations of the AIMR code ofEthics that they have heard about. Your response should be which of the following?I. Fineman and his managers are violating Standard IV (B.1) - Fiduciary Duties since they are not executing the trades at the lowest price available.II. Fineman and his managers are violating Standard IV (B.1) - Fiduciary Duties since they are using client brokerage to pay for services that do not directly benefit them.III. Fineman and his managers are violating Standard IV (B.7) - Disclosure of Conflicts to Clients and Prospects.IV. Fineman and his managers are not violating the Code as far as you can tell from the details given.

A. I, II and III
B. IV only
C. II only
D. II and III only