Article: A Safe Harbor For Mutual Fund Pirates!
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A Safe Harbor For Mutual Fund Pirates!
Soft dollars, a form of legal kickback, is a sly way you can get ripped off by mutual fund managers. Full service brokers give these kickbacks to non-indexed mutual funds in the form of a ?rebate? to purchase research, software, and even computer equipment.
You pay for these soft dollars! In recent years, the SEC estimated that soft-dollar deals exceeded $1 billion. Typically, $1 accrues for every $1.60 of brokerage commissions paid. Congress made these kickbacks legal in 1975 when it passed the ?safe harbor? law. The legislation allows fund managers to pay more in commissions than is necessary, as long as the excess comes back in the form of services or research that benefits investors.
The problem is that this has created an opaque system that can be abused....
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