Question 1 of 30
Alejandro, a seasoned equity trader at Redwood Investments, receives a large market order from a client, a pension fund, to purchase 50,000 shares of Maple Leaf Corp. Alejandro observes that Redwood\'s internal inventory holds a significant block of Maple Leaf Corp. shares acquired at a slightly lower price earlier in the day. Instead of immediately routing the order to the broader market, Alejandro decides to fill the order from Redwood\'s inventory, offering the shares to the client at a price marginally higher than Redwood\'s acquisition cost but still within the current market bid-ask spread. Alejandro discloses to the client that Redwood is acting as principal in the transaction and will profit from the spread. However, he does not actively seek quotes from other marketplaces to determine if a better price is available for the client. Considering UMIR and the trader\'s fiduciary duty, which of the following best describes Alejandro\'s actions?
Alejandro's actions are potentially in violation of UMIR and his fiduciary duty because, despite disclosing the conflict of interest, he did not demonstrate that he actively sought best execution for the client by comparing prices available in other marketplaces.
Alejandro's actions are compliant with UMIR as long as he disclosed to the client that Redwood Investments was acting as principal in the transaction and profiting from the spread.
Alejandro's actions are acceptable because the price offered to the client was within the current market bid-ask spread, demonstrating reasonable execution under prevailing market conditions.
Alejandro's actions are permissible since Redwood Investments held the shares in inventory, allowing for immediate fulfillment of the client's order and minimizing potential market impact.

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