Reuters – Soft-dollar deals — in which money managers pay above-market commission rates to get “free” brokerage services such as stock research — will be further restricted, but not banned, underrules adopted on Wednesday by the U.S. Securities and Exchange Commission.
The investor protection agency voted 5-0 to approve new official guidance on a Wall Street practice that started in the 1970s and has become widely used despite some controversy.
The SEC’s action follows disclosures that soft dollars have been used in some cases to pay for conferences in Bermuda, telephone calls, and even college tuition for managers’ kids.
Soft-dollars are non-monetary credits given to money managers by brokerages in exchange for payment by the managers of above-market commission rates for execution of buy and sell orders. The credits commonly go to managers of mutual funds, hedge funds, pension funds and other institutions.
Some investor activists have supported a complete ban on soft-dollars, arguing they sometimes are spent on products and services that benefit managers, but not fund investors.
