In a discretionary account scenario involving proxy voting and the use of a broker with favorable terms, which conclusion best reflects Standard III(A)?

• A. Yes, because the director's proposal should always be followed if requested by management.
• B. No, because Farnsworth investigated independently and voted in the best long-term interest after due diligence; the broker's information did not impact the account.
• C. Yes, because using the lowest commissions counts as best execution.
• D. No, because using a broker with useful information for other accounts is unacceptable.

Answer: (B)

Discretionary voting decisions must be guided by the client's best interests and carried out with independent due diligence, free from broker inducements or terms that could bias the outcome. In this scenario, the advisor, Farnsworth, conducted independent investigation and voted in the client’s best long-term interest after due diligence. The broker’s favorable terms or information did not influence the decision, which aligns with the duty to act with loyalty, prudence, and care toward the client.

Following management’s proposal indiscriminately would risk subordinating the client’s interests to management, not reflecting the client’s best long-term interests. Best execution concerns trading costs and prices, not proxy voting decisions. While conflicts can arise if a broker’s information or terms could affect decisions across accounts, the key is that the vote in this case was driven by the client’s interests and due diligence, not by the broker’s information, which is why this conclusion is correct.