The whole business boils down to the fact that the broker manages the client's funds for the client's benefit on the basis of a portfolio management contract. The way such work is carried out will probably change with the Central Deposit Agency beginning to function. Until now brokers apply various methods, as they do in carrying out ordinary transaction orders. As one of the subjects to be discussed, he mentions the brokers' practice of giving their portfolio management clients priority in the order of effecting transactions. Still, Mr Sulenta believes that brokers will continue to operate as they do now until regulation is established.
Some brokers say that with such practices, things look more and more like the Wild West.
Besides the usual aspects of carrying out transactions, in portfolio management there is the additional problem of powers of attorney. He adds that not even custody services are provided for in law and that the Securities Commission clearly still does not have the strength or equipment to grapple all these issues. In general, the questionable point, and not only in portfolio management, is in recording transfers. Other than that, the question of whether the issuer will recognise a broker's power of attorney is just one of several difficulties. He points out that, according to the rules, the client's assets must never be mixed with those of the brokering house.