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2007 Review: One Regulator's Surprising Attack on Soft Dollars

The Year in Trading

Traders Magazine, December 2007

Gregory Bresiger

Securities and Exchange Commission Chairman Christopher Cox surprised many in the securities industry when he suddenly called for the abolition of soft dollars. In a speech in May, Cox said soft dollars "offer perverse incentives to investment advisers to use them in ways that aren't beneficial to investors." Cox also suggested that soft dollars lead to higher brokerage costs and "may operate to impede the further development of efficient markets." Cox called on Congress to pass a bill to kill Section 28(e) of the Securities Act, which justifies the use of soft dollars. The use of soft dollars results in investors paying more for trades in exchange for access to research.

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