New Mexico Administrative Code › Title 2 - PUBLIC FINANCE › Chapter 60 - INVESTMENT AND DEPOSIT OF PUBLIC FUNDS › Part 14 - BROKER POLICY › Section 2.60.14.10 - SOFT DOLLAR POLICY

Current through Register Vol. 35, No. 13, July 16, 2024
A. The use of
				soft dollars refers to the use of commissions to pay for brokerage and research
				services instead of brokerage fees. It is common practice among large
				institutions to use a portion of the available commissions in both equity and
				fixed income portfolios to pay for investment-related goods and
				services.
B. GUIDELINES - The state
				investment office will be guided by prudent business principles and the
				following guidelines:
(1) The investment
				office will strictly follow the safe harbor" provision of Section 28(e) of the
				Securities and Exchange Act. The controlling principle used to determine
				whether an item constitutes brokerage and research services is whether it
				provides lawful and appropriate assistance to the money manager in the
				performance of his or her investment decision-making
				responsibilities.
(2) All soft
				dollar expenditures will be for the exclusive benefit of the funds managed by
				the investment office.
(3) The
				broker must provide brokerage and research services. The broker must incur the
				direct legal obligation to pay the third-party providers for the brokerage and
				research services.
(4) The
				investment office will determine that the value of brokerage and research
				services received is reasonable in relation to the amount of commissions
				paid.
(5) The investment office
				will not pay a higher commission rate on trades allocated to the soft-dollar
				account than it pays on any other trades with the same broker. Best price and
				execution will not be sacrificed.
(6) Best execution will not be sacrificed.
				Securities transactions will be executed in such a manner that the total cost
				or proceeds in each transaction is the most favorable under the circumstances.
				In placing brokerage, the investment office will consider the full range and
				quality of a broker's services, including but not limited to execution
				capability, the value of research, commission rate, financial responsibility,
				and responsiveness to the investment office.
(7) Obligations will be satisfied using
				normal flow of orders. Trades will not be created to pay for soft-dollar
				commitments.
(8) Fixed assets
				acquired with soft dollars will be included on the investment office inventory.
				equipment on loan from a third-party soft-dollar provider will not be included
				on the inventory.
(9) The state
				investment office will maintain records of soft-dollar procurement, including
				soft-dollar cost and actual (hard dollar) cost if the services are offered for
				hard dollars or can be obtained through other sources. The records will include
				details of the amount of securities transactions and related commissions
				allocated to the soft-dollar costs together with details of the arrangement
				governing the level of commissions necessary to meet these costs.
(10) Soft-dollar expenditures will be
				reported to the council annually at the close of the fiscal year.