15.2 Best Execution
Best execution requires striving for optimal trade outcomes. Section 28(e) safe harbors permit using client commission dollars (soft dollars) strictly for qualifying investment research.
Key NASAA Exam Takeaways
- Broker-dealers and advisers have an affirmative duty to seek the best execution reasonably available under the circumstances.
- Best execution factors: Price, order size, execution speed, trading venue reliability, and total transaction costs (not price alone).
- Soft Dollar Arrangements (Section 28(e) of Securities Exchange Act of 1934): Advisers may pay higher commissions to obtain brokerage and research services that benefit client portfolios.
- Permissible Soft Dollar items: Economic reports, financial analysis software, research seminars.
- Impermissible Soft Dollar items: Computer hardware, office rent, compliance software, furniture, overhead travel.
Knowledge Checkpoint • Section 15.2
Under the Section 28(e) safe harbor of the Securities Exchange Act of 1934, which of the following services CANNOT be purchased by an investment adviser using client soft dollar commissions?