SEC: No Legal Roadblocks To Unbundling
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Tuesday, May 02, 2006

SEC: No Legal Roadblocks To Unbundling

The Securities and Exchange Commission does not see legal roadblocks for mutual fund firms and brokerages looking to enter into unbundling arrangements, according to a Dow Jones Newswires report.

Robert Plaze, associate director of the commission's investment management division, said that legal issues surrounding such arrangements, which involve the splitting of stock trading and research costs, can be addressed.

"I've suggested a form of analysis that would allow these types of unbundlings to go through without any problem," Plaze was quoted as saying. "I don't think there are legal impediments to unbundling."

The SEC has been receiving an increasing number of queries from lawyers of mutual funds and brokerage firms mulling unbundling arrangements. Brokerages have asked whether charging separately for research constitutes a breach of the Investment Advisers Act of 1940.

In October 2005, Fidelity Investments struck an agreement with Lehman Brothers under which the mutual fund giant will purchase stock research using its own cash. The Boston Behemoth reached a similar deal with Deustche Bank Securities two months later. Lehman, for its part, is reportedly in talks with other fund firms about separating its stock trading and research costs.

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