Donaldson Vows To Reform Rather Than Ban Soft Dollar Commissions

by Glen Shapiro, LawAndTax-News.com, New York

24 February 2005

Speaking to the Financial Times earlier this week, chairman of the US Securities and Exchange Commission, William Donaldson suggested that he will not be seeking to ban so-called 'soft dollar' commissions, but will seek reforms.

Soft dollar payments are those made to financial services firms by other methods than cash. According to the FT report, Mr Donaldson is reluctant to ban such commission payments, as surveys have indicated that they account for a great deal of the equity research undertaken outside of the large Wall Street securities firms.

"Anything that inhibited third-party research being done outside the big firms would be a real mistake," the SEC chief told the business daily. However, he went on to add that:

"I think you will see us moving in the direction of a tighter definition of what is allowable to be paid for via soft dollars."

It is understood that reforms to the soft dollar commission rules in the United States will begin this year, although no final decision has yet been made on the way forward.

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