This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

NASD Panel Takes Aim at Soft Dollars

An industry board recommended stricter regulation of so-called soft dollars on Wall Street.

The National Association of Securities Dealers' Mutual Fund Task Force on Wednesday submitted its first set of recommendations to the Securities and Exchange Commission. The NASD panel is part of an effort to reform securities industry practices in the wake of last year's mutual fund market-timing scandal.

The SEC defines soft dollars as products and services that an investment manager receives from a broker-dealer in exchange for brokerage commissions. The task force was named last May to help advise the SEC on rule proposals regarding mutual fund cost disclosure and distribution arrangements. The aim is to eliminate possible conflicts of interest that could hurt fund investors.

"The Report of the Mutual Fund Task Force on Soft Dollars and Portfolio Transaction Costs" represents the conclusion of the first phase of the task force's work. It recommends that the SEC:

  • Narrow the types of research services that may be obtained with soft dollars.
  • Expand the disclosure in fund prospectuses about soft-dollar practices and portfolio transaction costs.
  • Provide more explicit guidance about the types of information that fund boards should receive about soft-dollar practices and portfolio transaction costs.
  • Consider soft-dollar issues raised by other managed advisory accounts, such as hedge funds.

"When a mutual fund adviser obtains research with soft-dollar commissions, it's important that the benefits all go to investors and not to the adviser," said Robert Glauber, who is chairman of the panel as well as chief of the NASD. "The task force's recommendations limit research activities bought with soft dollars to those that clearly benefit investors and require that advisers give more complete information on soft-dollar practices to fund boards. These changes will help protect investors and are in the interest of the mutual fund industry."

Other members of the 21-person committee include Vanguard Group CEO John Brennan, MFS Chairman Robert Posen, Legg Mason CEO Timothy Scheve and Franklin Resources co-CEO Martin Flanagan.

The second phase of the task force's assignment, which will focus on mutual fund distribution arrangements, is expected to take several months to complete.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs