The Mutual Fund Task Force of the National Association of Securities Dealers has submitted its first set of recommendations on soft dollars and portfolio transaction costs to the Securities and Exchange Commission.
Among its recommendations, the task forcecalls for:
- narrowing the types of research services that may be obtained with soft dollars;
- expanding the disclosure in fund prospectuses about soft dollar practices and portfolio transaction costs;
- providing more explicit guidance about the types of information that fund boards should receive about soft dollar practices and portfolio transaction costs; and
- considering soft dollar issues raised by other managed advisory accounts, such as hedge funds.
“When a mutual fund advisor obtains research with soft dollar commissions, it’s important that the benefits all go to investors and not to the advisor,” said the task force’s chair, NASD chairman & CEO Robert Glauber. “The Task Force’s recommendations limit research activities bought with soft dollars to those that clearly benefit investors and require that advisors give more complete information on soft dollar practices to fund boards. These changes will help protect investors and are in the interest of the mutual fund industry.”
The second phase of the task force’s assignment, which will focus on mutual fund distribution arrangements, is expected to take several months to complete, the NASD notes.