When the Mutual Fund Directors Forum recommended last week that curbing the use of soft dollars for research would benefit the industry, skepticism was bound to appear. On cue, The Wall Street Journal reports that a group representing brokerage firms lashed out against the proposal, saying that the legislation would hurt the industry.

"Without citing any quantitative or empirical evidence, the Mutual Fund Directors Forum has attacked a practice which has been used by mutual-fund advisers for decades to improve the performance of managed funds," said Pickard & Djinis managing partner Lee Pickard, who represents the brokerage group, the Alliance in Support of Independent Research.

While the Fund Directors Forum said high commissions that go toward the research should be ended, the alliance responded that no evidence exists that fund performance is hindered by soft dollar usage. Looking elsewhere for research money could result in terrible consequences for funds, especially in these uncertain times for the industry.

The Fund Directors Forum is expected to make an official recommendation about 12b-1 fees later this year, and if this disagreement is any indication, nothing will be passed without a fight.


The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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