The SEC this morning released its long-awaited report on soft-dollar practices in the investment management industry.
The report recommends the agency require all broker-dealers to give investment advisers an annual statement of all products, services and research provided in exchange for soft dollars. The report also recommends revising the ADV form to provide more detail about products and services purchased with soft dollars, especially those that have little or nothing to do with making investment decisions.
The report, based on surprise examinations of 75 broker-dealers and 280 investment advisers between November 1996 and April 1997, recommends the agency encourage broker-dealers and money managers to install internal controls relating to soft-dollar practices.
Additionally, the SEC's division of market regulation will give guidance on whether devices used to receive electronic research (such as satellites, cable systems and telephone lines) constitute research, said Lori A. Richards, director of the agency's office of compliance inspections and examinations.
``Compliance with the law needs to be improved. The message from this report should be unmistakable,'' Ms. Richards said.
Only about half of the 280 money managers examined gave their clients ``adequate'' information about their soft-dollar practices, she said.