Thus, we agree that a firm must not deal in a customer s account when it is not in the best interests of the customer. To achieve that goal, however, we believe it would be helpful for the COBS to give examples of when dealing would be too frequent in the circumstances, so as to provide the firm and individual managers with guidelines for making such a determination. This Standard provides that AIMR members must deal fairly and objectively with all clients and prospects when disseminating investment recommendations and taking investment action. This Standard has been interpreted in some situations to prohibit AIMR members from trading ahead of the dissemination of research reports of investment recommendations to clients. We also have some concern about the exception in the COBS that allows a firm or its associates to trade for its own account ahead of the client s if this possibility is disclosed in publications containing the recommendation or research.
Disclosure is only meaningful if it is clearly stated and apparent.
Therefore, we recommend that, if it retains this exception, the COBS contain a requirement that this disclosure appear prominently on the first page of the publication in font size no smaller than the publication s regular text. The AAC and LSIP believe that allowing a firm to execute an order for its own account ahead of its customer, regardless of the timing of the order, creates a conflict with the firm s fiduciary duty to its customers. Use of the term fairly requires that a firm take great care not to discriminate against any customers or clients when taking investment action. To this end, firms should be required to disclose to their customers the procedures they use to allocate investment opportunities to customers and the potential effect these procedures would have on a particular customer. This disclosure must be clear and complete, so that the customer is able to make informed investment decisions.