Soft Dollar Standards for Client Brokerage

Use our Soft Dollar Standards

Soft Dollar Standards for Client Brokerage (corrected 2011)

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Overview

Soft dollar (or soft commission) practices involve using client brokerage commissions to purchase research that helps managers to make investment decisions.

What is Covered?

  • Definition of soft dollars
  • Appropriate products and services to purchase with client brokerage
  • Application of standards for soft dollars
  • Model disclosure guidelines
  • The manager's role and responsibility to clients

Why was it Developed?

Because the soft-dollar practices have become more complex, we developed the Soft Dollar Standards to provide guidance beyond our Code of Ethics and Standards of Professional Conduct. Our Soft Dollar Standards put the focus on the client and provide investment professionals with guidance on how to use client brokerage ethically, based on the following principles:

  • Soft dollars belong to the client
  • Investment managers may only purchase research with soft dollars if the primary use is in the investment decision making process, not firm management
  • Investment managers must disclose all relevant benefits they receive through client brokerage

Erratum

The following correction was made to CFA Institute Soft Dollar Standards: Guidance for Ethical Practices Involving Client Brokerage (2004).

On page 12, in the second paragraph, the text referenced an incorrect Level of the curriculum. The sentence should read: "For example, if the Bloomberg service discussed in the Level II analysis was actually used 50 percent of the time to determine market and industry trends..."

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