Computer equipment and telephone lines don't fall within a reasonable definition of brokerage and research services that investment managers may charge to their clients, according to proposed guidance issued by the Securities and Exchange Commission on the use of "soft dollars."
In its interpretation, the regulator said that investment managers are making clients pay for "services and products that are only remotely connected to the investment decision-making process."

"Soft dollars" are a portion of commissions that clients pay their investment advisors to help fund research.

A study conducted in 1998 by the agency's Office of Compliance Inspections and Examinations found that some advisors were using client money to fund Certified Financial Analyst exam review courses, office rents and entertainment, among other things.

Last month, the commission voted unanimously to issue guidance on the use of soft dollars, that Commissioners said they planned at a later date to consider tightening rules on how money managers record and disclose to their clients the soft-dollar expenditures.

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