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CCM CLIENT COMMISSION
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Client Commission Arrangements
Section 28(e) Safe Harbor
- 1975 Amendment by Congress of the Securities Exchange Act of 1934.
- Clarified in Interpretive Releases of 1976, 1986, 2001, and 2006.
- Section 28(e) was enacted to provide a safe harbor that protects money managers from a breach of fiduciary duty solely on the basis that they paid more then the lowest available commission rate. Congress recognized that requiring money managers to trade only on the basis of cost would deprive them of the research they need to make informed decisions.
- Money managers act within the safe harbor if they determine in good faith that the amount of commission is reasonable in relation to the value of the brokerage and research services received.
Money Managers benefiting from Client Commission Arrangements
Compliance Benefits
- CCA's help money managers fulfill their fiduciary duty to acquire the research needed to make prudent investment decisions.
- Third party research costs can be quantified in order to document compliance with the Section 28(e) safe harbor; there is no market price for bundled sell-side research.
Economic Benefits
- Money Managers can now purchase independent research in spite of decreasing advisory fees.
Research Benefits
- Independent research is unbiased.
- Complex instruments such as MBS/ABS require detailed data from specialized, independent data providers.
CCM’s Role
- As a non-positioning B/D, CCM's fixed income trading model is uniquely positioned to serve the CCA and directed brokerage needs of fixed income asset managers, plan sponsors, endowments, insurance companies and corporate treasuries.
CCM and Compliance
- CCM works with money managers to develop a 28(e)-compliant process.
- CCM's outside legal counsel is available to consult with clients on all CCA and directed brokerage issues.*
*Consulting fees may apply
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