Term: Soft Dollars

CFA Level I Glossary

Soft dollars are client brokerage commissions used to pay for research or other services from a broker-dealer instead of (or in addition to) pure execution. They can be acceptable when the research benefits clients and the practice is disclosed and reasonable. Using soft dollars for the manager’s overhead or unrelated benefits violates duties to clients. Hard-dollar research purchases from the management firm’s own budget are the contrast case.

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