Cox Urges Congress for Outright Ban on Soft Dollars

Securities and Exchange Commission Chairman Christopher Cox says there is only so much that regulators can do to properly regulate the research still permitted to be bundled in soft dollars. Thus, he called on Congress on Thursday for an outright ban on the practice altogether, The Wall Street Journal reports.Congress began allowing soft dollars to be bundled in with brokerage commissions in 1975, with the goal of providing the buy side with research and tools to benefit investors. Last year, the SEC modified that to apply only to research, but some firms went further as to ask their brokers to unbundled the fees for research.

“The SEC’s embarked on a campaign to make investing more understandable for retail investors,” Cox told Dow Jones Newswires. “This fog that surrounds soft dollars makes investing harder, not easier, for ordinary investors.” In addition, a ban would likely result in lower fees and eliminate the potential for any conflicts of interest, whether the fund manager directs more trades to the broker because of the research or allocates the use of the research for another client or fund, he said. Commission on trades involving soft dollars are typically five cents, whereas they are two cents on trades conducted through electronic crossing networks.