A broker-dealer is looking to expand its business. In an attempt to lure the business of a prominent local investment adviser representative (IAR), it offers the IAR several of its services allowing them to be paid for by soft dollars. Which of the following would be an inappropriate soft dollar arrangement?[A] The offer of market quotes performed in real time[B] The offer of the use of asset allocation software that has been customized for the application[C] The offer of subscriptions to the broker-dealer's research reports[D] The offer of paying the salary for the services of an analyst from the research department.

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29 August, 08:39

A broker-dealer is looking to expand its business. In an attempt to lure the business of a prominent local investment adviser representative (IAR), it offers the IAR several of its services allowing them to be paid for by soft dollars. Which of the following would be an inappropriate soft dollar arrangement?[A] The offer of market quotes performed in real time[B] The offer of the use of asset allocation software that has been customized for the application[C] The offer of subscriptions to the broker-dealer's research reports[D] The offer of paying the salary for the services of an analyst from the research department.

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Carolina Welch · Answer 1

[D] The offer of paying the salary for the services of an analyst from the research department.

Explanation:

Soft dollars, also known as brokerage, include any dollars retained on a trade to be used for services for the client's benefit. When brokerage firms pay for research services through commission revenue rather than a direct payment, this arrangement is termed soft dollar payments. The above example shows direct payment of an analyst from the research department rather than through commission revenue.