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.

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.
• Backs off from greater restrictions on comm-share recipients (but further comment sought on treatment so position not finalised).
• 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

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