Continuing the debate over soft dollar research, Dreyfus Corp.'s Chairman and CEO Stephen E. Canter said proposed restrictions would hurt fund shareholders by prohibiting some of the most innovative research used by portfolio managers the Wall Street Journal reports.

Overall, Dreyfus agreed that scrutiny is warranted in the practice of soft dollars but disagreed with a proposal introduced by the Investment Company Institute which the company believes if passed would benefit large Wall Street securities firms at the expense of many independent, smaller firms.

"I think it's likely that a number of highly valued, independent research organizations would no longer be in business. We would all lose valuable input which we think is integral to our investment process," said Canter who is also a member of the ICI's board.

The ICI board of governors' recently decided to ask the Securities and Exchange Commission to bar the use of soft dollars for stock-research products, computers and software that came from outside vendors. However, the ICI proposed that firms be allowed to continue using the payment system for research and other services produced by the big Wall Street brokerage firms that handle a large portion of their trades. Yet, the organization said Congress should look into the issue.

The ICI has been roughly criticized for its positions on numerous issues, including soft dollars and the hard 4 p.m. trading deadline but members told the WSJ that the organization was pressing ahead with some of its issues because of its desire to surpass regulators on the issue, as well as to detract attention from the criminal probes into mutual-fund trading abuses unrelated to soft dollars.

Craig Tyle, general counsel of ICI, told the WSJ that the group may still support a measure to end soft dollars usage altogether, after SEC and Congressional reviews, but said in the meantime, "it's better to do something that's imperfect than continue to put the issue off." He also said that the group wasn't insinuating that Wall Street research is better than third-party services. Rather, "to the extent this research is valuable, it will be purchased in the marketplace," he said.  

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE