- CFA Institute's soft-dollar rules are not mandatory. In any case, client brokerage can be used to pay for a portion of mixed-use research.
- Investment firms can use client brokerage to purchase research that does not immediately benefit the client. Commissions generated by outside trades are considered soft dollars, but commissions from internal trading desk are not.
Are these statements on the soft dollar standards correct?
- Correct.
- Statement 1 is true. CFA Institute Soft Dollar Standards are voluntary, though firms that wish to claim compliance with the Standards must follow them completely.
- Client brokerage can be used to pay for mixed-use research with the caveat that the research must be reasonable, justifiable, and documentable, and that the client brokerage is only used to pay for the portion of the research that will be used in the investment decision-making process.
- Incorrect.
- Commissions from both internal and external brokerage operations are considered soft dollars, so Statement 2 is false.
- While research paid for by client brokerage should directly benefit the client, it does not have to do so immediately.
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