Brokerage Committee
Building a Soft Dollar Dashboard for Fund Directors Print E-mail
Written by C. Meyrick Payne & Jay Keeshan   

Monitoring soft dollars is a critical component of mutual fund governance. Soft dollars represent an aspect of fund operations where there is potential for extensive conflict of interest between the manager and the fund shareholders. Fund directors have to mediate that conflict within the provisions of the securities laws which specifically permit the use of soft dollars. Soft dollars essentially represent an “off balance sheet” asset and should be treated with as much care as a similar asset class in a commercial company.

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Building a Best Execution Dashboard for Fund Directors Print E-mail
Written by C. Meyrick Payne & Jay Keeshan   
Measuring best execution can be mind-numbingly complicated, we lay out the basic design of a dashboard containing critical measurements for monitoring best execution. This dashboard, along with a similarly-structured dashboard for overseeing soft dollars, will be the focal point of discussion during the current series of workshops being held by the Mutual Fund Directors Forum and Management Practice.
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"Follow the Money" to Understand Soft Dollars Print E-mail
Written by C. Meyrick Payne   

Much has been written about the legal niceties of soft dollars in the context of mutual fund operations, particularly what is allowed and how it can be legally accomplished. Little has been written about the economics of soft dollars. The industry has long argued that fund shareholders benefit. Once the underlying dollar flows are laid out it becomes clear that, while technology will erode the creation of soft dollars, they are not going away quickly because (1) they are well accepted in the securities industry and (2) they make pretty good sense since the brokerage commission has to be built into the share price. On the other hand, an understanding of both sides of a soft dollar transaction, creation and recapture, highlights the need for independent directors to stay alert to the potential for unfair treatment of the fund investors.

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Measuring Best Execution (Update 2003) Print E-mail
Written by C. Meyrick Payne in cooperation with Wayne Wagner, President of Plexus Group Inc. of Los Angeles   

The purpose of this Bulletin is help mutual fund directors wrestle with the difficulty problem of measuring bestexecution of share trades. Best execution is major topic during routine SEC examinations and, in many cases, a difficult topic for mutual fund boards.

Directors often ask each other "why are we paying as much as 6 cents a share to make a trade when everyday I am bombarded with offers to effect a whole transaction for $19.95". Well of course, there are some good, and some not so good, reasons. This Bulletin presents a framework for mutual fund directors to analyze this issue.

 

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