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Soft Dollars / Regulatory Issues - A Global Summary

UK

  • Regulatory changes[1] effective from 1st July 06. 
  • Commissions strictly limited to execution and research. 
  • Disclosure must separate out payments for these. 
  • Applies equally to 3rd party and proprietary sell-side research. 
  • "Soft commission" redundant as a regulatory concept. 
  • Explicit market price for research to emerge.

Europe

  • Disclosure requirements similar to the UK now in place in a number of European countries, including France and Germany.

USA

  • SEC[2] finally confirms Interpretation Release[3] on Soft $ "safe harbor".
  • Clarifies that "Soft $" refers to both proprietary and 3rd party research.
  • Defines what services can be paid by commission and what cannot.
  • Form ADV now[4]  obliges fund managers receiving Soft $ benefits to disclose such practices and explain any conflicts of interest arising as a result.
  • But enhanced disclosure of commission use still not yet addressed.

Asia-Pacific

  • Commission share and traditional "soft dollar" possible for trades for most markets
  • Disclosure guidelines generally unlikely till US position finalised.

[1] FSA Final Rules 22nd July 05
[2] SEC vote12th July 06
[3] Interpretative Release October 05
[4]  SEC Final Rule effective 10th Oct 10

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