The Alliance in Support of Independent Research has asked Securities and Exchange Commission Chairman Christopher Cox to reconsider repealing Section 28(e) of the Securities and Exchange Act of 1934 that permits soft dollars to pay for investment research.

Lee Pickard, counsel to the alliance and a partner with Pickard and Djinis, said, “The repeal of Section 28(e) would drastically reduce the flow of investment research to asset managers, to the detriment of both small and large investors. It would also cripple the independent research industry and impair the ability of small money managers and their investment funds to compete with their larger peers.”

Although Cox has said abuses of soft dollars are widespread, the alliance noted that there have been only three such cases since 1998, when the SEC issued its soft dollar inspection report. The alliance also noted that the SEC’s own 2004 soft dollar task force recommended retaining the safe harbor in Section 28(e), narrowing the scope of eligible research services, providing additional guidance on client commission arrangements and studying whether such arrangements should be further disclosed to investors.

The group also noted that hedge funds would continue to be able to afford investment research, putting retail and other smaller investors at a serious disadvantage.

“There is no reason to make major changes to a practice that has served the markets well for almost 30 years, especially when Section 28(e) arrangements have not been the source of any significant abuse,” the group maintains.

Alliance members include executives from BNY ConvergEx Group, Capital Institutional Services, E*Trade Brokerage Services, Knight Equity Markets and Morgan Keegan.

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