What is Section 28e?
Under Section 28(e), a money manager is protected from liability for a breach of fiduciary duty solely on the basis of having paid more than the lowest commission rate for “brokerage and research services provided by a broker-dealer,” the manager determines in good faith that the amount of the commission is reasonable …
What is Section 28 e safe harbor?
Section 28(e) of the Securities Exchange Act of 1934 creates a safe harbor that allows private fund managers (and other investment advisers), under certain circumstances, to use client commission payments to purchase eligible brokerage and research services.
What is soft-dollar eligible?
Generally, a particular product or service falls within the safe harbor if an adviser can demonstrate that the research or brokerage service obtained with soft dollars: (i) is an eligible research or brokerage service within the specific limits of the safe harbor, (ii) provides lawful and appropriate assistance in the …
What is soft-dollar compensation?
A soft commission, or soft dollars, is a transaction-based payment made by an asset manager to a broker-dealer that is not paid in actual dollars. They believe that buy-side firms should pay expenses out of their profits. As such, the use of hard-dollar compensation is becoming more common.
What is client brokerage soft dollars?
Soft dollars are a means of paying brokerage firms for their services through commission revenue, as opposed to through hard-dollar direct payments. Many investors believe that buy-side firms should pay expenses out of their own profits. As a result, the use of hard-dollar compensation is becoming more common.
What is hard and soft dollar?
The difference between soft and hard dollars is that instead of paying the service providers with cash (i.e. hard dollars), the mutual fund will pay in-kind (i.e. with soft dollars) by passing on business to the brokerage. Soft dollars are a way for mutual funds to get services without having to pay for them directly.
What is hard dollar compensation?
Hard dollars are cash fees or payments made by an investor or customer to a brokerage firm in return for their services. Hard dollar payments are usually set amounts that are known before a customer begins dealing with a broker.
Are soft dollars illegal?
Soft dollars are a way for mutual funds to get services without having to pay for them directly. While the practice is not illegal, and the end result is the same (the investors pay), it does not help investors analyze the costs of using one mutual fund versus another.
What does hard dollar mean?
What is client brokerage?
Client-Directed Brokerage Arrangement refers to an arrangement whereby a Client directs that trades for its account be executed through a specific Broker in exchange for which the Client receives a benefit in addition to execution services.
What are soft dollars CFA?
The soft dollar is the payment made by investment managers/funds by either paying extra in commisions or committing to minimum amount of trade with the brokerage in exchange for the proprietary research or services.
What does Section 28(E) stand for?
Summary: We are publishing interpretive guidance on the application of Section 28(e) of the Securities Exchange Act of 1934 (“Exchange Act”). This section provides a safe harbor to money managers who use the commission dollars of their advised accounts to obtain research…
Does Section 28(E) apply to markups and markdowns?
In that letter, the Division of Market Regulation stated that, “Section 28 (e) refers to `commissions’ only, which connote transactions effected on an agency basis, and does not refer to markups or markdowns, which would more clearly have suggested that Congress intended to extend the safe harbor to principal transactions.” See supra note 2.
Can you rely on Section 28 (E) safe harbor?
The Commission relied on this legislative history in adopting the 1976 guidelines, but expressed its view that in order to rely on the Section 28(e) safe harbor, the product or service must not be readily and customarily available and offered to the general public on a commercial basis.
Can a money manager make the necessary determination under Section 28(E)?
In recognition of the transparency achieved in the Nasdaq market for certain riskless principal transactions, which allows a money manager to make the necessary determination under Section 28 (e), we are modifying our interpretation of Section 28 (e).