Whatever soft dollar arrangements are–and there are more than a few professionals who would disagree with Barron‚s or Aronson‚s definition–they have a considerable history. Soft dollars were legally created by Congress and regulators in the wake of May Day 1975. That‚s when commission rates were deregulated. The SEC enacted Section 28(e), an amendment to the Securities Act of 1934. Investment advisors using soft dollars, under the section, must use the credit to provide "lawful and appropriate assistance" to the account manager carrying out responsibilities, the SEC said. Ultimately, this critical section was put on the books because of fears that the unfixing of commissions–bringing competition to something that had never had competition before–would lead to dirt-cheap prices. Without this safe harbor, managers who passed up the brokerage 99-cent store could be accused of breaching their fiduciary obligations. Still, the key goal was giving the retail broker and investor a better deal.

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