Soft dollar

rdf:langString Soft dollar

rdf:langString The term soft dollars refers to a Wall Street practice, especially in the asset management and securities industries, and means the benefits provided to an asset manager by a broker-dealer as a result of commissions generated from a financial transaction executed by the broker-dealer for client accounts or funds managed by the asset manager. In a soft dollar arrangement, the investment manager directs commissions generated by a client's or fund's transactions to a broker-dealer or other trading venue. Soft dollars, in contrast to hard dollars (actual cash) which have to be reported, are incorporated into brokerage fees and paid expenses, which may not be reported separately (partly due to the difficulty in their valuation). Most investment managers follow the limitations detailed in Section 28(e) of the Securities Exchange Act of 1934. In particular, if soft dollar arrangements are entered into with respect to registered investment companies and pension plans (ERISA and public plans), compliance with Section 28(e) is generally required. However, hedge funds, which are generally not registered, may not be subject to the limitations of Section 28(e) and, thus, in some cases, the fund's commissions may be used for the adviser's benefit. In situations where fund commissions are used outside of the Section 28(e) safe harbor, full and comprehensive disclosure must be provided to fund investors.