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A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
 |
Three years on, the National Association of Securities Dealers continues to levy fines against firms for improper sales of Class B and C mutual fund shares. This week, the self-regulatory organization dinged Merrill Lynch, Pierce, Fenner & Smith, Wells Fargo Investments and Linsco/Private Ledger Corporation $19.4 million for supervisory violations related to mutual fund sales.
Merrill Lynch took the biggest hit, with a $14 million fine, while Wells Fargo and Linsco paid $3 million and $2.4 million respectively. The fines approximate the added commissions raked in when the firms sold Class B or C shares in lieu of Class A shares to investors. The three also are disgorging funds to some 29,000 customer households. The period under investigation ran between January 2002 and July 2003. NASD says during that time firms recommended and sold B and C shares without consistently disclosing that A share investments would have, in most cases, been better for the clients.
While Class A shares do carry front-end sales charges, their asset based charges are generally lower than those imposed by B and C shares. Class A shares also generally offer the advantage of breakpoints, a discount on the front-end sales charge that’s offered when a client buys a large number of shares.
NASD’s investigation into mutual fund sales practices began when it was discovered many firms did an inadequate job of keeping track of breakpoints. Funds offering breakpoints allow clients within the same household to combine their holdings, but the spotty record keeping systems at many firms led to a breakdown in the rewarding of those discounts.
Soft Interpretation
The Securities and Exchange Commission’s October release of a report on what types of expenditures are and aren’t permitted under its soft-dollar safe harbour answered many, but not all, of the industry’s longstanding questions.
SEC Market Regulation director Annette Nazareth told a recent gathering of mutual fund directors the commission had been concerned about many of the items being provided to advisors under the guise of research, and she said the release “directly addresses the abusive practices that had developed over time and updates the interpretation in light of new technologies and practices.”
Among other things, the SEC release established once and for all that the purchase of computer hardware does not qualify as a research expense. Regardless of the fact such hardware may be used to analyze data that’s legitimately paid for by client commissions under the safe harbour, the machines themselves fall outside the limit. Likewise, expenses for travel and meals incurred by advisors attending seminars are not eligible. Other items now definitively placed outside the safe harbour include:
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
|
Three years on, the National Association of Securities Dealers continues to levy fines against firms for improper sales of Class B and C mutual fund shares. This week, the self-regulatory organization dinged Merrill Lynch, Pierce, Fenner & Smith, Wells Fargo Investments and Linsco/Private Ledger Corporation $19.4 million for supervisory violations related to mutual fund sales.
Merrill Lynch took the biggest hit, with a $14 million fine, while Wells Fargo and Linsco paid $3 million and $2.4 million respectively. The fines approximate the added commissions raked in when the firms sold Class B or C shares in lieu of Class A shares to investors. The three also are disgorging funds to some 29,000 customer households. The period under investigation ran between January 2002 and July 2003. NASD says during that time firms recommended and sold B and C shares without consistently disclosing that A share investments would have, in most cases, been better for the clients.
While Class A shares do carry front-end sales charges, their asset based charges are generally lower than those imposed by B and C shares. Class A shares also generally offer the advantage of breakpoints, a discount on the front-end sales charge that’s offered when a client buys a large number of shares.
NASD’s investigation into mutual fund sales practices began when it was discovered many firms did an inadequate job of keeping track of breakpoints. Funds offering breakpoints allow clients within the same household to combine their holdings, but the spotty record keeping systems at many firms led to a breakdown in the rewarding of those discounts.
Soft Interpretation
The Securities and Exchange Commission’s October release of a report on what types of expenditures are and aren’t permitted under its soft-dollar safe harbour answered many, but not all, of the industry’s longstanding questions.
SEC Market Regulation director Annette Nazareth told a recent gathering of mutual fund directors the commission had been concerned about many of the items being provided to advisors under the guise of research, and she said the release “directly addresses the abusive practices that had developed over time and updates the interpretation in light of new technologies and practices.”
Among other things, the SEC release established once and for all that the purchase of computer hardware does not qualify as a research expense. Regardless of the fact such hardware may be used to analyze data that’s legitimately paid for by client commissions under the safe harbour, the machines themselves fall outside the limit. Likewise, expenses for travel and meals incurred by advisors attending seminars are not eligible. Other items now definitively placed outside the safe harbour include:
A 1998 report by the SEC’s Office of Compliance Inspections and Examinations indicated all the above items had been paid for using soft dollars at various firms that were examined.
Nazareth conceded the guidance is a little thin on some issues, including documentation of brokerage and research advisors receive through soft dollars, particularly when those things come from full-service brokers. “Fund boards could better assess the appropriateness of soft dollar arrangements if the commission mandated better disclosure of the research and brokerage services provided to the advisor for the bundled commission rate charged,” she said.
By reviewing the execution-only commission rates, she added, fund directors would have the means to compare what the fund would have been charged without the additional services, and then make inquiries into the value of those additional services for the shareholders.
To read the SEC’s soft dollar interpretation, please click here.
Filed by Philip Porado, Advisor’s Edge, philip.porado@advisor.rogers.com
(12/23/05)
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