PurposeThe purpose of this paper is to explain the SEC staff's web site responses to a series of frequently asked questions concerning SEC Advisers Act Rule 206(4)‐5.Design/methodology/approachThe paper explains the SEC staff responses to FAQs on the ability to rely on prior Municipal Securities Rulemaking Board interpretations regarding MSRB Rules G‐37 and G‐38, determining who is an “official of a government entity,” determining who is a “covered associate,” payments of commissions or other compensation to brokers or others, the Rules' application to political action committees (PACs), and “effective dates” and “compliance dates” under the related recordkeeping rule.FindingsPay‐to‐play is the practice of making campaign contributions and related payments to elected officials in order to influence the awarding of lucrative contracts for the management of public pension plan assets and similar government investment accounts. The staff's answers to the FAQs announce cautious positions, do not address some of the more difficult issues advisers may face on a day‐to‐day basis, and are subject to change.Originality/valueThe paper provides practical guidance from experienced financial services lawyers.
Purpose -To describe and analyze in detail an Interpretive Release (the ''2006 Interpretation'') approved on July 12, 2006 by the US Securities and Exchange Commission (''SEC'') regarding the soft dollar safe harbor under Section 28(e) of the Securities Exchange Act of 1934.Design/methodology/approach -Following a brief discussion of the history of soft dollars, describes and analyzes in greater detail relevant aspects of the 2006 Interpretation, including an explanation of the three-part test concerning the use of soft dollars to pay for products and services under the safe harbor, a discussion of ''mixed use'' items, further detail on soft dollar arrangements, an explanation of liabilities and obligations of managers and broker dealers, and an implementation timeline.Findings -Under the 2006 Interpretation, a money manager may rely on the safe harbor to acquire products or services only upon satisfaction of each part of a three-part test. First, does the product or service meet the eligibility criteria of Section 28(e)(3)? Second, does the eligible product or service provide lawful and appropriate assistance in the performance of relevant responsibilities? Finally, may the money manager properly conclude, in good faith, that the commissions paid are reasonable in relation to the value of the research and brokerage products and services provided by the broker (in relation either to the particular transaction or to the money manager's overall responsibilities with respect to discretionary accounts)? The 2006 Interpretation also is relevant to broker-dealers who may receive soft dollars. Under Section 28(e), a money manager can pay soft dollars only to broker-dealers who ''provide'' research or brokerage services and ''effect'' transactions. Under the 2006 Interpretation, the circumstances under which broker-dealers will be seen as ''providing'' services and ''effecting'' transactions will be interpreted more broadly than under past interpretations, allowing brokers and money managers greater flexibility to structure soft dollar and commission-sharing arrangements in a manner that will better serve the interests of investors.Originality/value -Provides a detailed analysis of the 2006 Interpretation concerning soft dollars. Keywords Securities, United States of America Paper type TechnicalThe purpose of [the 2006 Interpretation] is to better circumscribe the use of soft dollars, which are really inflated brokerage commissions, to ensure that they are used only for research and not for other things . . .
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