U.K. Regulator Proposes Soft Dollar Rules

Washington, DC, October 11, 2005 - The U.K. Financial Services Authority (FSA) recently published a consultation paper on the disclosure of bundled brokerage and soft dollar arrangements to retail fund investors.

Background
The report addresses two main issues: the use of brokerage commissions for research products and services (commonly referred to as "soft dollars") and the ability of investment advisers to take into account sales of fund shares in selecting a broker-dealer to execute transactions in portfolio securities (often referred to as "directed brokerage").

In July 2005 the FSA published rules and guidance on the treatment of goods and services received by investment managers in connection with dealing commission. However, the FSA states in its report that the proposals did not address the position of investors in retail investment funds, including investors in open-ended investment companies, investment trusts, and the managed funds of life assurance companies.

The FSA has proposed, and is seeking comment on, the creation of an investor representative that would receive soft dollar disclosure on behalf of retail fund investors and interacting with the manager where necessary. The consultation paper seeks input on the concept of soft dollar disclosure to such an “investor representative” and input on who might serve as the representative in various organizational structures for funds.

Comments on the proposal are due to the FSA by January 6, 2006.