The ability to conduct innovative research, which is often the selling point for independent mutual fund firms, would be squashed if the Investment Company Institute’s proposal to curb soft dollars is ratified, an executive from Mellon Financial subsidiary Dreyfus Corp. told The Wall Street Journal.

Stephen E. Canter, chairman and CEO of Dreyfus and vice chairman of Mellon, said the ICI’s suggestion – specifically that computers and software from outside vendors and stock research products not be purchasable with soft money - would benefit large firms and harm smaller mutual funds.

"I think it's likely that a number of highly valued, independent research organizations would no longer be in business," said Canter, who is a member of the ICI board. "We would all lose valuable input which we think is integral to our investment process."

The argument for the curbing of soft dollars is that fund shareholders wind up paying more in commissions and paying for services that are normally considered the responsibility of investment managers.

Amid the ICI’s proposal, companies like Janus and Banc One have already halted soft dollar usage for third party research.

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