The Securities Industry Association is applauding the guidance handed down by the U.S. Securities and Exchange Commission on the use of “soft dollars”.

The SIA notes that the SEC has issued an Interpretive Release that provides guidance on money managers’ use of client commissions to pay for brokerage and research services, which clarifies the scope of brokerage and research services and offers guidance on client commission arrangements.

“The SEC’s guidance effectively clarifies how client commissions may be used by money managers,” says Marc Lackritz, president of the SIA. “Most importantly, the guidance does not lend itself to unnecessary over-regulation.”

The SIA says that one of the main points of contention under the soft dollars rule was lack of clarity surrounding proprietary versus third-party research. The SEC’s guidance clarifies that both proprietary research and third-party research fall within the scope of the soft dollar safe harbor, it notes.

“The guidance issued by the SEC very closely reflects recommendations made by SIA and others in comment letters submitted to the SEC in late 2005,” points out Michael Udoff, vice president and associate general counsel, SIA. “We are pleased to see that the SEC carefully considered SIA’s concerns regarding commission-sharing agreements, and has recognized that best execution and the best research can often both be achieved through such arrangements.”