Client’s best interest rule: Difference between revisions

So we start to put some parameters on it: a [[dealer]] must have ''legitimate'' grounds for not trading: [[credit]] appetite, [[market risk]], prevailing [[volatility]], reputational and so on, as legitimate grounds. No doubt imaginative risk managers could think of  others. At some point, any old fool can contrive ''some'' plausible excuse for not trading, so in practice we are at the point the [[JC]] started with: ''you don’t have to offer the same product, on the same terms, to everyone''. But this is a bad intellectual ground for getting there. None of these putative grounds have anything to do with “fairness between clients” as such — they all speak to the [[dealer]]’s personal risk appetite. So if these reasons ''do'' trump an incoming client’s request to trade, then it stands to reason that the [[dealer]]’s own interest takes precedent over the (putative) client’s interest. If so, this is a either a transgression of the client’s best interest rule, or a situation in which the client’s interest doesn’t prevail. The [[JC]] says it is ''obviously'' the latter.

The same goes for close-outs and disputes. when confronted with any practial means of sorting out a specific dispute on a settlement failure with a client,. [[compliance]] will be sore pressed not to caution ''against'' this, on grounds of treating customers fairly - the equity in question being the resolution of this specific issue, and any other settlement or trading issue that might arise in any market, with any client at any time, if putatively analogous. Again, this ought not be the purpose of the [[TCF]] rule, if for no other reason it will “chilling” effect on a [[dealer]]’s appetite for settling any dispute with any client in any circumstances short of a final judgment of a competent court. [[TCF]] does not introduce the obligation to operate some kind of internal [[stare decisis]] policy, obliging a [[dealer]] to apply a [[doctrine of precedent]] binding it for all times to any practical accommodation it might make with any of its clients at any time for any reason. The intention is surely more limited: if ''two'' clients grumble about the ''same'' valuation the dealer makes on the ''same'' product at the ''same'' time, then TCF obliges the dealer who fixes the problem for one client to offer corresponding resolution to the other. Be even handed. That is all.