Commission Guidance Regarding Client Commission Practices Under Section 28(e) of the Securities Exchange Act of 1934
The Securities and Exchange Commission is publishing for comment this interpretive release with respect to client commission practices under Section 28(e) of the Securities Exchange Act of 1934 (``Exchange Act''). Section 28(e) of the Exchange Act establishes a safe harbor that allows money managers to use client funds to purchase ``brokerage and research services'' for their managed accounts under certain circumstances without breaching their fiduciary duties to clients. In light of the Commission's experience with Section 28(e) and in recognition of changing market conditions, the Commission is proposing to provide further guidance on money managers' use of client assets to pay for research and brokerage services under Section 28(e) of the Exchange Act. This release also reiterates the statutory requirement that money managers must make a good faith determination that commissions paid are reasonable in relation to the value of the products and services provided by broker-dealers and that broker- dealers must be financially responsible for the brokerage and research products that they provide to money managers and must be involved in ``effecting'' the trade.
Adoption of Amendment to Delegation of Authority to Secretary of the Commission
The Securities and Exchange Commission (``Commission'') is amending its Delegation of Authority to Secretary of the Commission to permit the Secretary to waive the bond requirement set forth in the Rules on Fair Fund and Disgorgement Plans if the fair or disgorgement funds are held at the U.S. Department of the Treasury (``Treasury'') and will be disbursed by the Treasury. This amendment is intended to enhance efficient processing of disgorgement/fair fund plans and to lower the cost of plan administration.