WASHINGTON — A good first step.
That's the gist of many of the comments the SEC received on the first part of the guidance it issued on soft-dollar arrangements.
"We view the proposal as a first and useful step in addressing the larger issues presented by soft-dollar arrangements," Alan S. Mostoff, president of the Washington-based Mutual Fund Directors Forum, wrote in his comments to the SEC.
But, like many others, Mr. Mostoff asked the Securities and Exchange Commission to take "prompt action" to clarify the need for money managers to tell their clients about what research they received from brokerage firms instead of cash discounts on trades.
On Oct. 19, the SEC clarified the definition of "research service" money managers can receive from brokerage firms as part of these arrangements: it must be confined to "advice," "analyses" or "reports" that help money managers make investment decisions.
At the time, SEC officials did not say when the regulator would clarify the obligations of money managers to tell their clients about the research services received.
For years, soft-dollar arrangements — in which money managers receive research from brokerage firms instead of cash discounts on securities they buy and sell through them — have been controversial. Some have questioned whether the research products and services money managers receive through these arrangements result in better investment performance or do no more than lower the managers' costs of doing business.
The forum of independent mutual fund directors asked that in its guidance on what money managers should tell their clients about the soft dollar research they've received, the SEC specifically require mutual fund advisers to disclose all brokerage and research services, including their value, to mutual fund directors.
Like many other commentators, the forum also asked that the SEC further narrow the definition of "research services" money managers may receive.