WASHINGTON — A task force set up by SEC Chairman William H. Donaldson earlier this year to review soft-dollar arrangements is expected to issue its recommendations sometime next month.
The SEC had issued wide-reaching recommendations on soft dollars in a September 1998 report following "sweep" examinations of brokerage firms, money managers and mutual fund companies, but failed to act on those recommendations. Those exams had found that nearly one-third of the examined money managers used soft dollars to pay for routine business expenses rather than research, and they failed to tell their clients about them. Now, Mr. Donaldson, who is rumored to be stepping down at the end of the year, has made it a goal to address soft dollars before he leaves the SEC.
In soft-dollar arrangements, money managers typically pay brokerage firms higher than the prevailing commission rates in order to obtain investment research services or products. The spate of mutual fund trading scandals in the last year has prompted heightened regulatory scrutiny of investment practices, including soft dollar arrangements..