Frequently Asked Questions
What is Section 28(e)?
- 1975 Amendment by Congress of the Securities Exchange Act of 1934.
- Clarified in Interpretive Releases of 1976, 1986, 2001, and 2006.
Why did Congress enact 28(e)?
- 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 than the lowest 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.
- Navigator: "The Safe Harbor"
What is "eligible research"?
- Advice, Analysis, and Reports
- Navigator: "Safe Harbor Compliance"
- Client commission arrangements may be used to pay for research that contains analysis, advice, or reports useful in performing investment decision-making responsibilities for account over which the money manager exercises investment discretion.
- See our list of independent research vendors whose research we pay for through client commission arrangements.
When was Fixed Income covered under Section 28(e)?
- Fixed income agency trades have been eligible since the enactment of Section 28(e) in 1975. In 2001, the SEC included riskless principal transactions in securities subject to trade reporting systems (such as OATS and TRACE). The SEC's 2006 Guidance further clarified the issue with respect to fixed income.
- Navigator: "Fixed Income Soft Dollar?"
Why are transactions with CCM eligible under the safe harbor, while transactions elsewhere may not?
- CCM is a non-positioning broker/dealer acting on an agency or riskless principal basis.
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