CFA Institude Soft dollar Standards reading 3～reading 4
INTRODUCTION
CFA Institute Soft Dollar Standards provide guidance to investment profession-
als worldwide through the articulation of high ethical standards for CFA
Institute Members dealing with “soft dollar” issues. CFA Institute Soft Dollar
Standards are consistent with and complement the existing CFA Institute
Standards of Professional Conduct that all CFA Institute Members and Candidates
in the CFA Program are required to follow.
The purposes of the Standards are to define “soft dollars,” identify what is
“allowable” research, establish standards for soft dollar use, create model disclo-
sure guidelines, and provide guidance for client-directed brokerage arrangements.
The Soft Dollar Standards are voluntary standards for Members. If a CFA
Institute Member claims compliance with the Standards, then certain of these
Standards are mandatory (i.e., they must be followed to claim compliance) and
others are recommended (i.e., they should be followed). CFA Institute strongly
encourages Members to adopt the required and recommended Standards. If the
Soft Dollar Standards are adopted, compliance will not supplant the responsibility
to comply with applicable law.
1 CFA Institute Members should comply at all times
with the relevant laws of the countries in which they do business. In situations in
which these Standards impose a higher degree of responsibility or disclosure than,
but do not conflict with, local law, the Member is held to the mandatory provi-
sions of these Standards.
BACKGROUND
In 1975, the U.S. Congress created a “safe harbor” under Section 28(e) of the
Securities and Exchange Act of 1934 to protect investment managers from claims
that they had breached their fiduciary duties by using their client commissions to
pay a higher commission to acquire investment research than they might have
paid for “execution” services. According to Securities and Exchange Commission
(SEC) Staff, the protection of Section 28(e) is available only for securities trans-
actions conducted on an agency basis.
2 Since that time, the soft dollar area has
undergone considerable expansion, both in terms of actual usage and the types
of products and services for which safe harbor protection is claimed. The com-
plexity of these practices, including technologically sophisticated research tools
and the existence of “mixed-use” products, has resulted in a fair amount of legit-
imate confusion surrounding the appropriate use of soft dollars.
CFA Institute seeks to provide ethical standards for CFA Institute Members
and those in the industry that engage in soft dollar practices and also emphasizes
the paramount duty of the investment manager, as a fiduciary, to place the inter-
ests of clients before those of the investment manager. In particular, the Soft Dol-
lar Standards focus on six key areas:
Definitions—to enable all parties dealing with soft dollar practices to have a
common understanding of all of the different aspects of soft dollars.
Research—to give clear guidance to investment managers on what prod-
ucts and services are appropriate for a manager to purchase with client
brokerage.
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