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Form ADV Part 1A Item 8C(3) · Answer type: yn · Item 8 - Brokerage Practices
Item 8C(3) asks whether the firm has discretionary authority to choose the broker or dealer used for a client's securities transactions: meaning the adviser can select where and how client trades are executed without requiring client approval for each broker choice.
Discretionary broker selection authority means the adviser can route trades to different execution venues based on factors like commission rates, execution quality, available research, or other business considerations. The adviser might use multiple brokers for different types of trades or concentrate trades with preferred brokers based on their professional relationships.
This authority creates potential conflicts because broker selection can affect execution costs, trade quality, and adviser compensation through soft dollars or other arrangements. The adviser must balance getting best execution for clients against their own business relationships and revenue opportunities.
An adviser managing discretionary accounts who routes client trades among multiple brokers based on execution quality and cost would mark Yes. An adviser whose clients direct all trades through their own brokerage accounts would mark No.
Yes
The adviser has discretionary authority to select brokers for client trades. This requires them to seek best execution while managing potential conflicts from broker relationships, soft dollar arrangements, or affiliated brokerage entities.
No
The adviser does not have discretionary authority to select brokers. Clients likely direct their own brokerage arrangements, or trades are executed through predetermined venues specified by clients rather than chosen by the adviser.
8C(3) - Broker or dealer to be used for a purchase or sale of securities for a client's account (Yes / No).
This checkbox is part of Item 8C, which covers different aspects of discretionary authority that advisers may have over client brokerage activities and trading decisions.
Broker selection authority can create conflicts where advisers might choose execution venues based on their own business benefits rather than purely on client interests. A Yes answer means you should understand their broker selection process and potential conflicts.
When advisers control broker selection, they might favor brokers that provide research, technology, or other soft dollar benefits, direct trades to affiliated brokers, or choose venues that offer them better commercial terms rather than focusing solely on execution quality and cost for clients.
A Yes does not tell you which brokers they use, how they evaluate execution quality, whether they have conflicts through broker relationships, how their broker selection affects your costs, or what policies they have to ensure broker choices serve client interests.
Check 7A(1) for an affiliated broker and 8G(1) for reported soft dollar benefits. Request the brokers used, the commission schedule, and the criteria in the firm's broker-selection or best-execution review.
Yes
Review 8D, 8E, 8F, and 8G(1) for related brokers, recommendations, and soft dollar benefits. Match those answers to the broker list and commission terms in the firm's client documents.
Also check 6A(1) and 7A(1) to understand any direct or affiliated broker-dealer operations that might affect broker selection decisions.
No
The adviser does not report discretionary broker selection authority. Review 8E to see if they recommend brokers to clients, and check their custody arrangements in Item 9 to understand how client trades are typically executed when they don't control broker selection.