Best Execution

An adviser's fiduciary duty includes:

1. A.Maximizing the adviser's revenueAn adviser is entitled to run a profitable business, which is what makes this sound reasonable. But the fiduciary duty describes whose interest governs when the two diverge, and the answer is the client's, which is why conflicts must be disclosed rather than exploited.
2. B.Hiding feesConcealing compensation is a breach of the duty, not a component of it. Fees are material to any client evaluating the relationship, so they belong in the open.
3. C.Seeking best execution and disclosing conflictsCorrect - core fiduciary obligations.
4. D.Guaranteeing returnsGuaranteeing performance is prohibited regardless of the adviser's intentions, so it cannot be an element of any duty. Fiduciary obligation concerns the care and loyalty brought to the advice, not the results the market delivers.

Why: The fiduciary duty includes seeking best execution and disclosing material conflicts of interest.

An adviser's duty of best execution requires it to:

1. A.Trade for its own account firstPutting the firm's own orders ahead of client orders is a prohibited practice, not a component of best execution. The duty runs to the client's transactions, requiring the most favorable terms reasonably available for them.
2. B.Ignore execution qualityExecution quality is the entire subject of the duty, so disregarding it is a definition of the breach rather than the obligation. The adviser must evaluate how orders are handled and revisit that assessment periodically.
3. C.Seek the most favorable terms reasonably available for clientsCorrect - best execution obligation.
4. D.Always use the cheapest broker regardless of qualityCommission rates are a legitimate part of the analysis, which is why this has real appeal. But the standard is the most favorable terms overall, and a low-cost venue that fills orders poorly or slowly can cost the client more than it saves.

Why: Best execution means seeking the most favorable terms reasonably available for client transactions.

An adviser routinely uses a costlier broker without seeking better terms. This violates:

1. A.The privacy rule onlyThe privacy rules govern how an adviser handles client personal information. Routing orders to an expensive broker without shopping for better terms costs the client money on execution, which is a wholly different duty.
2. B.The duty of best executionCorrect - best execution is required.
3. C.NothingAn adviser may select a broker for reasons beyond raw commission rate, such as execution quality or research, and that flexibility is what makes this tempting. But it must periodically evaluate whether the arrangement still serves clients; never looking at the alternatives is what breaches the duty here.
4. D.A marketing ruleMarketing rules govern advertisements, testimonials, and performance claims made to prospective clients. Broker selection is a portfolio management decision, and nothing in this stem involves how the adviser promotes itself.

Why: Failing to seek the most favorable terms reasonably available breaches the duty of best execution.

An investment adviser fiduciary duty is best summarized as the duties of...

1. A.Loyalty and careCorrect — the fiduciary standard comprises the duties of loyalty and care.
2. B.Suitability and disclosure onlySuitability alone is the lower broker standard, not the full fiduciary duty.
3. C.Diligence and guaranteed returnsNo fiduciary owes guaranteed returns; guarantees are prohibited.
4. D.Confidentiality and profitabilityConfidentiality matters, but the defined fiduciary duties are loyalty and care.

Why: The fiduciary standard comprises the duty of loyalty (put the client first, manage and disclose conflicts) and the duty of care (competent, suitable advice and best execution).