Safe-Harbor Comments Flow Over Deadline

WASHINGTON (HedgeWorld.com)–When the Securities and Exchange Commission requested comment on its interpretation of the client commission practices permitted under section 28(e) of the Securities Exchange Act of 1934–i.e., the “soft-money/safe-harbor rule”–it set a deadline of Nov. 25.

Thirty-three comments arrived before that date, including one from the Managed Funds Association. Twelve comments appeared on the deadline date. Thirteen comments have arrived since then.

An SEC spokesman, John Heine, said Thursday [Dec. 15] that this isn’t unusual, and that “we try to be flexible,” in reading and considering late comments, but “if people really want their comments to be taken into account, they’ll get them in by the deadline.”

Jeffrey T. Letzler, Instinet’s deputy general counsel, submitted the last comment received, Dec. 9. Instinet, as Mr. Letzler’s submission observes, has offered soft-dollar programs for more than 15 years. He expressed that company’s concern that the proposed guidance goes further than the statutory mandate allows, creating a de facto prohibition of certain commission-sharing arrangements. This could have various harmful effects on investors, he wrote: limiting the depth and breadth of available research, increasing commission costs, reducing competition, reducing transparency, and protecting arrangements that are more costly and less efficient than those it would bar.

In an interview, Mr. Letzler said, “We had a meeting on the 22nd of November with the SEC staff. This was the earliest we could get it set up.” He said that both Instinet and the staff wanted the Instinet comment to incorporate the exchange of views at that meeting.

He also said that the staff assured the Instinet executives at the meeting that it would consider Instinet’s comments, despite a reasonable delay, past the deadline. The U.S. Thanksgiving holiday (which fell on Nov. 24, two days after that meeting) also played a role in slowing the preparation of the comment.