Brokerage commissions are not paid by the fiduciary managing funds; they are debited directly from funds’ assets when trades settle. The advisor directs each transaction to the broker/dealer of his choice, and the fund holder pays a commission that bundles brokerage and research fees together into a per-share rate. Just as there is no statutory definition of “hedge fund”, there isn’t one for “soft-dollars”. A common definition is that it is the difference between the commission rate paid by the fund and the lowest rate available for a specific transaction.
Section 28e of the 1975 Amendments to the Securities Act (28e) provides a safe harbor for a fiduciary to pay more than the minimum commission rate available if it is:
“determined in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided…”
In 2005 Fidelity Investments wound down the practice of paying dealer bundled commissions based on the observation that if they did not know how much they were paying for brokerage services vs. research, they could not determine in good faith whether or not the fee was reasonable.
Past interpretations of 28e expressed skepticism that “market data” qualifies as research.
One can argue that vendors like Bloomberg and Thomson Reuters that produce analytics and proprietary news are much closer to “research” than it is to “market data”. Columnists, financial models, relative value & comparative analytics, portfolio risk reports are all examples of services that, if provided by a broker, would certainly be categorized as research.
It should be easy for a fiduciary to determine in good faith whether or not $n per month for an analytics and news package is reasonable. ECNs charge explicit rates for brokerage services. Are these services excluded from being classified as research because we charge an explicit fee?
The SEC should issue interpretive guidance that:
A) Refines the definition of “research” to include a description of the Professional Service.
B) Emphasizes safe harbor protection for fiduciaries who unbundle services paid for with soft dollars.
Thanks For Visiting
My background is in financial information systems. I have worked on applications that analyze equities and equity derivatives as well as credit derivatives and structured products. I also have an unusual fascination with financial market regulation and market structure.
My two active hobbies are long distance hiking and programming. In an effort to bring those two things together I’ve done a lot of noodling around with the Google Maps Api. It’s a hobby I go into more detail about in the “hiking” and “programming” sections.
I was going to make a post when I arrived last night, but I forgot. Yesterday was a very, very long day; almost 11 hours on my feet. It was the first time I’d walked at night and the misery of the last hour and a half was practically surreal. It was pouring.
I checked into the first reasonable looking B&B I walked past after entering the heart of the old city at 8 o’clock and ended up in a fantastic place called Casas Reais.
I lied down for an hour and then went the 200 or so yards to the cathedral.
I then moved on and had some tapas before heading home, but before I got there I ran into most if the gang that I had met the first day in Spain (last day in France) outside a bar smoking. The Boinga girls (Terri and Kirsten) were there as was Amir from Iran,Nick the young Canadian, Maria from Germany and a few others.
Six weeks ago, before I even reached Bordeaux, I had met a girl named Sabine who was the only person I knew of that was walking the Tours route all the way to SdC. She actually started from her grandfathers house a couple of days northeast of Tours and had a very cool walking stick. I’d lost track of her after a day or two and was regretting not exchanging contact information with her. About 20km into yesterday’s walk, Sabine passed me. I recognized her from her stick! I actually knew she wasn’t far behind me because a Polish girl named Anka had told me that she was walking with someone named Sabine from Paris who had come down with food poisoning at an albergue. Sabine & Anka hadn’t exchanged contact info and Sabine thought Anka had probably finished days ago because she’s a very fast walker. But this morning when I went to get my “compostela”, I had the pleasure of seeing them reunited!
Santiago runway is in sight.
I’m about 35km outside of Santiago, which is less than two regular days of walking. I’ll try and leave pretty early this morning to try & give myself a shot if getting there later today. Chances are that I’ll end up short of Santiago and leave myself ten more km on Friday am.
The pilgrim mass is at noon and its famous for the huge bale if incense (botafumiero) swinging from the rafters. Since its purpose is to fumigate smelly pilgrims, it seems appropriate to walk in right off the trail, but we’ll see.
The bad news is that it rained all day again today but the good news is that it didn’t pour all day.
My biggest surprise of this trip is how few things I’ve lost. Up until this morning the only thing that went missing was a long sleeve cotton pullover, which I replaced with a wool sweater in Pamplona. This morning I lost my duct tape!
To those if you whose morning routine does not include duct taping plastic bags around your feet before putting them in your shoes, this may not sound like such a big deal. But to me, in the last week or so the image that defines “cozy” to me is this one right here.
Luckily I still have some fancy tape that I bought back in Puente la Reina to pimp out my walking stick. Actually it was to cover the duct tape I used to stabilize the crack in the stick. Anyway I think it’ll do for the next couple of days. That’s actually a sticker covering most of the blingy tape.
Once the Camino enters Galicia, there are these markers every half km. All of a sudden I’m less than 100 km from Santiago.
There’s a whole new batch of pilgrims today – the group that started this morning in Sarria. They’re mostly Spanish and their enthusiasm is nice to have around. We weren’t a single km out of Sarria this morning before the groups were posing in front of the first wilderness they could find for pictures in their rain gear. At the end of the day they had their turn hobbling into town after their first 25km carrying a pack. It’s amazing how day 1 makes everyone equal; we’ve all been there, walking up the stairs sideways at the end of day 1.
Today’s stop is Portomarin, and its just across the Rio Mino to the west. Back in the day there was a well known Galician seafood restaurant in Madrid called Rio Mino. It’s a beautiful spot (the town on the river).
Today’s weather was a relief. It rained pretty much all day, but not hard. It’s supposed to rain again tomorrow but we’ll see.
When people say that the weather in a specific area is unpredictable, what they really mean is that the weather is usually crappy there. The weather app on my phone has a big yellow sun on it for this morning but all I see out the window is gray.
My stuff is mostly dry now, which I’m thankful for. I wasn’t able to take much in the way of pictures yesterday, as it was pouring all day long. A lot of people I spoke with thought it was the most miserable day on the Camino so far. This is around the point where I gave in to the realization that my feet couldn’t get any wetter and started walking right down the middle of the stream that the path had become.
After today’s stage there will be 115 km left to go which should take 5 days. The day ends in Sarria, where the route promises to get much more crowded because it only takes 100km to officially complete the Camino.
I’m glad this is almost over!