|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
SEC Limits On Soft Dollar' Deals Spark Comments From Industry
Staff Writer
Securities Mosaic. December 1, 2005
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EXCERPT: Advisers and other industry participants have begun to weigh in on the latest guidance released by the Securities and Exchange Commission in its continuing battle against "soft dollar" arrangements. The agency, in the written proposal, placed limits on the type of research and brokerage services that could be paid for with soft dollars. The guidance comes at a time when such arrangements are under attack from investor groups. New SEC Chairman Christopher Cox has vowed to crack down on the abuses. The guidance also puts the SEC in line with rules adopted in July by its counterpart in Britain, the Financial Services Authority. The proposed guidance sets up a laundry list of research and brokerage services that would fall under a safe harbor provision that would allow soft dollar arrangements. To be eligible for the safe harbor, research services have to furnish advice on the value of securities or whether it's advisable to invest in certain securities. Or those services would have to provide analysis or reports about issuers, industries, securities, economic factors and trends, portfolio strategy and similar information. Specifically, those services would include financial data on companies, post trade services, algorithmic trading software, and economic data on unemployment, inflation and gross domestic product, the SEC explained. But other products-such as Web site design, software for e-mail or Internet service, legal expenses. accounting fees and order management systems-don't qualify for soft dollar arrangements. One critic of the guidance, William George of Blue Sky Research Services in Encino, Calif., was particularly distressed that trade analytics didn't qualify for the safe harbor. "Such trade analysis is very useful for determining best execution' and trading quality and consistency," he wrote in a post on the SEC's Web site. "By deduction, it's also useful for analyzing the costs and the components of brokerage commissions. Trade analytics also reveals performance loss from poor execution, and it reveals excess commission charges." In another post on the SEC's site, Stephen L. Schardin, managing director of Charles River Brokerage, called the elimination of order management systems from the safe harbor an "arbitrary" decision by the SEC. |
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