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Compliance September 21, 2005
SEC Puts Tighter Soft Dollars Rules Out for Public Reaction
September 21, 2005 (PLANSPONSOR.com) - Federal
regulators have proposed stricter rules on how mutual funds
can spend soft dollars and have invited public comment on the
move over the next month.
Reported by Fred Schneyer
Under rules proposed Wednesday by the US Securities and Exchange Commission (SEC), items considered research in the past – including computer hardware and even entertainment expenses – would lose that designation, according to a MarketWatch report. The only areas to be labeled as research include advice, analyses and reports.
By a unanimous vote, commissioners asked fund managers, brokers and others to provide the agency with comment about the rule within 30 days. In soft-dollar transactions, mutual-fund companies pay brokerages higher trading commissions or give them increased business in exchange for investment research and other services (See Soft Dollar: Fixing the Leaks ).
Chairman Christopher Cox said the rules would provide investors with greater clarity. “Investors have an interest in knowing what are the actual brokerage and management costs they are paying,” said Cox, according to the MarketWatch report.
Commissioner Paul Atkins said soft dollars are useful for small funds to pay for research, but that he was troubled by reports of soft dollars being used to pay for what he called “absurd, troubling” items like office equipment and even college tuition.