27 Carter works for Invest Today, a local asset management firm. A broker that
provides Carter with proprietary research through client brokerage arrangements is offering a new trading service. The broker is offering low-fee,
execution-only trades to complement its traditional full-service, execution-andresearch trades. To entice Carter and other asset managers to send additional
business its way, the broker will apply the commissions paid on the new service
toward satisfying the brokerage commitment of the prior full-service arrangements. Carter has always been satisfied with the execution provided on the fullservice trades, and the new low-fee trades are comparable to the fees of other
brokers currently used for the accounts that prohibit soft dollar arrangements.
A Carter can trade for his accounts that prohibit soft dollar arrangements
under the new low-fee trading scheme.
B Carter cannot use the new trading scheme because the commissions are
prohibited by the soft dollar restrictions of the accounts.
C Carter should trade only through the new low-fee scheme and should
increase his trading volume to meet his required commission commitment
