Campos on Soft Dollar Disclosure


New York—Roel Campos, one of the two remaining Democratic SEC commissioners, is leaving the SEC this month to go into private practice.  BoardIQ, a bi-weekly online publication for mutual fund trustees, recently interviewed Campos.  Among the questions posed was a question about guidelines on soft dollar disclosure.  BoardIQ has given us permission to excerpt the relevant portion of the interview for ResearchWatch readers.

Two key takeaways from the interview:

  1. As Campos is at pains to emphasize, guidance on soft dollar disclosure is not a sure thing, despite SEC Chairman Cox’s recent testimony to the Senate Banking Committee.  Campos indicates that the SEC staff is still wrestling with the topic, and raises the possibility there may be no guidance.
  2. Campos suggests that increased disclosure might hurt independent research, and this might be an impediment to new regulation.  If this is a concern at the SEC, it is ill-founded.  It implies some confusion in the SEC, at least at the Commissioner level.

As Campos indicates, he is a supporter of increased soft dollar disclosure, but he is leaving the SEC.  Rumor has it that Commissioner Annette Nazareth, another supporter of soft dollar disclosure, will also be departing.  Cox has said he is a supporter of disclosure, although his views on soft dollars are a moving target.   The bottom line is that there will be at least one fewer Commissioner supporting increased soft dollar disclosure. 

If the SEC continues to do nothing on this topic, it increases the chance that soft dollars will be banned altogether the next time there is some abuse of the safe harbor.  Soft dollars are a tinderbox area—it won’t take much to ignite a legislative and regulatory backlash, given the confusion, misapprehensions, and mistrust surrounding the topic.  Perpetuating the current opaque situation will serve no one well, but, as Campos indicates, that may be what we will have to deal with.

BoardIQ subscribers can follow this link to the full article:


Q&A with Commissioner Roel Campos: Top Concerns for Boards

Article published on Sep 4, 2007
By Amanda Gerut

Roel Campos, one of two Democratic commissioners of the SEC, will leave the five-member body this month and return to private practice as a lawyer. He has served since August 2002.

Campos, 58, who is known to have supported the SEC’s Division of Enforcement program as a way to restore investor confidence after scandals, will head up law firm Cooley Godward Kronish’s Washington, D.C., practice. Campos will now sit on the other side of the dais, representing companies involved with SEC enforcement proceedings, mutual fund regulatory and compliance issues and internal investigations.

Q: What are your thoughts on the upcoming release of soft dollar disclosure guidance? Do you think it will help fund boards?

I think the first thing that has to be said is that our staff is continuing to work very diligently on what it will recommend to the commission in terms of new soft dollar disclosures, if any. And that’s very important to say, that it’s not at all a given that we’re going to have a release. The staff has been studying data gathered from the roundtable discussion and other commentary. It’s a little bit up in the air as to exactly what will be recommended. That shouldn’t be viewed as a problem; it’s just that it’s a complicated area that involves balancing the needs of the industry and balancing the needs, of course, of investors.

From my perspective, I’m on record for quite a while as having stated that I support the proposition of “do no harm to independent research.” I think we have, in the financial services world, too little which is independent research. Whether we like it or not, we have a situation where independent research has been funded over the years through soft dollars, and it’s difficult to change the rules and pay for it directly, even though that seems logical. People in the industry have come to me and other commissioners and essentially sworn on a stack of bibles that independent research will be seriously affected and damaged if it were not to be funded through soft dollars. At this time, we have not received contrary evidence or a point of view that this is not the case. I’m concerned about independent research; I want to keep it alive.

Having said that, I think soft dollars suffer from inadequate disclosure and opacity. And I don’t believe that fund boards understand, in many cases, how soft dollars are being used. I think we have issues that prevent full and transparent disclosure and understanding of how soft dollars are being used. For example, an advisor may in some instances bundle together various research firms and sources of research and may also bundle dollars in such a way that dollars from Client A end up really benefiting Client B because Client B uses a particular source of research more than Client A does…. So it seems to me those are things that may not be comfortable for advisors to disclose, but I think investors and definitely boards should understand how their money is being used in this particular area. We need improvement there. I would support a system of better disclosure.


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