soft dollar

CFA Level II Ethics
#1

Hi,

can someone tell me when it says soft dollar from Agency and Principal trades.

i am not very clear on what is a principle trade.

it’s when the broker sells the security got a discount or I sell the security got a discount?

#2

Agency : trading for clients.

Principal : trading for themselves.

#3

I was under the impression that an agency trade was when the investment manager received a payment of commission and a principal trade involves an investment manager selling a security at a spead (ie: asset was either acuqired before at a discount then later sold to client or asset is bought immediately and sold at a slight spread).

Based of S2000 magician’s post, it seems I may be incorrect. I would like to know as well now =)

#4

You’re correct:

  • The investment manager receives a commission because he’s trading for a client: an agency trade is trading for a client
  • The investment manager sells a security at a spread when he’s acquired it at one price and sold it at another (higher) price: a principal trade is trading for himself
#5

Thanks, I hope they “DONT” ask this question on the test because we will get it wrong. *WINK*