Assess whether a firm's trading processes, disclosures and records meet good governance standards

Good trading governance starts with a written trade policy that defines best execution and how it is monitored. It should set how brokers and venues are chosen and reviewed, how orders are allocated fairly across client accounts (such as pro rata for partial fills, as recommended under Standard III(B) Fair Dealing), how conflicts such as soft-dollar arrangements, cross trades and personal dealing are handled, and how trade errors are corrected. The firm should disclose its execution arrangements and material conflicts to clients and keep records of orders, timestamps, allocations, broker selection and cost analysis. Best execution is a process, not simply the lowest commission. The trap is judging governance by cost alone: missing records or unfair allocation fail however cheap the trades were.